Interim Results 2010

RNS Number : 4978Q

Standard Chartered PLC

04 August 2010

Standard Chartered PLC - Financial Highlights

For the six months ended 30 June 2010

Reported results

· Profit before taxation of $3,116 million, up 10 per cent from $2,838 million in H1 2009 and up 35 per cent from $2,313 million in H2 2009

· Profit attributable to ordinary shareholders¹ up 11 per cent to $2,098 million from $1,883 million in H1 2009 (H2 2009: $1,396 million)

· Operating income broadly flat at $7,924 million from $7,960 million in H1 2009, but up 10 per cent from $7,224 million in H2 2009

· Normalised income up 3 per cent at $7,908 million from $7,704 million in H1 2009 (H2 2009: $7,210 million)

· Total assets up 17 per cent to $481 billion from $411 billion in H1 2009 (H2 2009: $437 billion)

Performance metrics²

· Normalised earnings per share up 10 per cent at 104.9 cents from 95.0 cents in H1 2009 (H2 2009: 85.1 cents)

· Normalised return on ordinary shareholders' equity of 14.7 per cent (H1 2009: 17.0 per cent, H2 2009: 12.2 per cent)

· Interim dividend per share increased 10 percent to 23.35 cents per share

Capital and liquidity metrics

· Advances-to-deposits ratio of 76.2 per cent (H1 2009: 78.4 per cent, H2 2009: 78.6 per cent)

· Core Tier 1 capital ratio at 9.0 per cent (H1 2009: 7.6 per cent, H2 2009: 8.9 per cent)

· Total capital ratio at 15.5 per cent (H1 2009: 15.8 per cent, H2 2009: 16.5 per cent)

Significant highlights

· Delivered strong broad-based performance, with profit before taxation of $3,116 million, up strongly by 10 per cent on H1 2009 and up 35 per cent on H2 2009

· Significantly reduced impairment provisions, driven by disciplined and proactive approach to risk

· Raised over $4 billion of lower Tier 2 and senior debt, prefunding all maturity requirements of 2010 and leaving minimal refinancing obligations over next few years

· Continued focus on the basics of good banking, maintaining a liquid, well diversified balance sheet with limited exposure to problem asset classes and a strong capital position

· Successful listing of Indian Depository Receipts on the Bombay and National stock exchanges in India

Commenting on these results, the Chairman of Standard Chartered PLC, John Peace, said:

"We continued our strong performance in the first half of 2010 and both of our businesses have had an encouraging start to the second half. Despite the regulatory and economic uncertainties, our focus on the basics of banking will continue to hold us in good stead. Standard Chartered remains in excellent shape"

¹ Profit attributable to ordinary shareholders is after the deduction of dividends payable to the holders of those non-cumulative redeemable preference shares classified as equity (see note 8 on page 67).

² Results on a normalised basis reflect the results of Standard Chartered PLC and its subsidiaries (the 'Group') excluding items presented in note 9 on page 68.

Standard Chartered PLC - Stock Code: 02888

Standard Chartered PLC - Table of contents
	Page
Summary of results	3
Chairman's statement	4
Group Chief Executive's review	5
Financial review	10
Group summary	10
Consumer Banking	12
Wholesale Banking	15
Balance sheet	19
Risk review	21
Capital	50
Financial statements
Condensed consolidated interim income statement	53
Condensed consolidated interim statement of comprehensive income	54
Condensed consolidated interim balance sheet	55
Condensed consolidated interim statement of changes in equity	56
Condensed consolidated interim cash flow statement	57
Notes	58
Statement of director's responsibilities	98
Independent review report	99
Additional information	100
Glossary	120
Financial calendar	123
Index	124

Unless another currency is specified, the word 'dollar' or symbol '$' in this document means United States dollar and the word 'cent' or symbol 'c' means one-hundredth of one United States dollar.

Within this document, the Hong Kong Special Administrative Region of the People's Republic of China is referred to as 'Hong Kong'; The Republic of Korea is referred to as Korea or South Korea; Middle East and Other South Asia (MESA) includes: Pakistan, United Arab Emirates (UAE), Bahrain, Qatar, Jordan, Mauritius, Sri Lanka and Bangladesh; and 'Other Asia Pacific' includes: China, Malaysia, Indonesia, Brunei, Thailand, Taiwan, Vietnam and the Philippines.

Standard Chartered PLC - Summary of results For the six months ended 30 June 2010
	6 months ended	6 months ended	6 months ended
	30.06.10	30.06.09	31.12.09
	$million	$million	$million

Results
Operating income	7,924	7,960	7,224
Impairment losses on loans and advances and other credit risk provisions	(437)	(1,088)	(912)
Other impairment	(50)	(15)	(87)
Profit before taxation	3,116	2,838	2,313
Profit attributable to parent company shareholders	2,148	1,933	1,447
Profit attributable to ordinary shareholders¹	2,098	1,883	1,396


Balance sheet
Total assets	480,827	411,220	436,653
Total equity	30,053	23,890	27,920
Total capital base	36,246	32,324	35,265


Information per ordinary share	Cents	Cents	Cents
Earnings per share - normalised²	104.9	95.0	85.1
- basic	103.4	98.8	69.9
Dividend per share³	23.35	21.23	44.80
Net asset value per share	1,358.1	1,133.1	1,281.6


Ratios
Return on ordinary shareholders' equity - normalised basis²	14.7%	17.0%	12.2%
Cost income ratio - normalised basis²	54.3%	49.6%	53.2%
Capital ratios
Core Tier 1 capital	9.0%	7.6%	8.9%
Tier 1 capital	11.2%	10.5%	11.5%
Total capital	15.5%	15.8%	16.5%

¹	Profit attributable to ordinary shareholders is after the deduction of dividends payable to the holders of those non-cumulative redeemable preference shares classified as equity (see note 8 on page 67).
²	Results on a normalised basis reflect the results of Standard Chartered PLC and its subsidiaries (the 'Group') excluding items presented in note 9 on page 68.
³	Represents the interim dividend per share declared for the six months ended 30 June 2010 and 30 June 2009 and the recommended final dividend per share for the six months ended 31 December 2009 (subsequently declared at the Annual General Meeting on 7 May 2010 and recognised in these financial statements).

Standard Chartered PLC - Chairman's statement

Standard Chartered has achieved another very good performance in the first six months of 2010:

• Profit before taxation rose 10 per cent to $3.12 billion

• Income broadly flat at $7.92 billion

• Normalised earnings per share were up 10 per cent to 104.9 cents

The Board has declared an interim dividend of 23.35 cents per share, up 10 per cent.

The Group has continued to perform strongly in the first half of 2010, despite increasing competition and tighter margins. We are investing for growth and Standard Chartered remains in excellent shape, with a strong and liquid balance sheet.

This has been an eventful as well as a successful six months for Standard Chartered. In June we became the first foreign company to list Indian Depository Receipts in Mumbai. We also launched our new brand promise, 'Here for good', with all the different and positive meanings it has for the Bank's stakeholders and for how we go about our business.

These remain challenging times. There is fragility in the global economy and nervousness in financial markets. While there is economic improvement in our markets of Asia, Africa and the Middle East, they are still dependent on a recovery in the West which is much less certain.

As a bank which spans East and West, we can see how much more positive the mood is across our markets. We can also see how differently the crisis affected each region and, now, how regulators are taking different approaches to reinforcing the financial system.

It is a matter of great concern to us, as a truly international bank, that regulations and taxes are not being introduced equivalently on an international basis and that UK banks could be put at a disadvantage to those elsewhere.

Despite the regulatory and economic uncertainties, our focus on the basics of banking will continue to hold us in good stead. Strong governance has also remained an important focus. During the first half of the year, the Board was strengthened by the appointment of three non-executive directors. Dr Han Seung-Soo, former Prime Minister of the Republic of Korea; Richard Delbridge, who has a wealth of financial experience from a wide-ranging banking career; and Simon Lowth, currently an Executive Director and Chief Financial Officer of AstraZeneca PLC.

Jaspal Bindra, our Chief Executive for Asia, was appointed to the Board as a Group Executive Director. We also separated the existing Audit and Risk Committee to accentuate the focus on risk management.

I would like to thank the Board, management and staff of the Bank for their dedication and effort. We continued our strong performance in the first half of 2010 and both our businesses have had an encouraging start to the second half.

John Peace

Chairman

4 August 2010

Standard Chartered PLC - Group Chief Executive's review

This is a strong set of results, achieved against an uncertain and sometimes difficult external environment. Whilst the global economy is undoubtedly recovering, particularly in Asia, this recovery is very uneven, somewhat fragile, and there are still many risks.

In our pre-close trading statement at the end of June we deliberately used quite cautious language to describe the environment. Through May and June we had seen softer markets, trade and business volumes falling, investors spooked by sovereign debt and currency issues. Recently we have seen more positive sentiment in the markets, and encouraging upticks in some businesses.

However, we remain somewhat cautious. We don't expect a smooth recovery, and we anticipate further bursts of volatility.

Back in March, at our full year results, I outlined five key risks that I saw in the global economy. These are all still relevant. The imbalances in the world economy remain acute. Deleveraging in the West is now happening in both the public and private sectors, particularly in Europe. This will inevitably be painful. Central banks have only just begun to unwind liquidity support measures. Unemployment remains the biggest political issue in most countries, creating pressure for populist and protectionist measures. The regulatory change agenda is enormously complex, often fragmented and fraught with unintended consequences.

With confidence febrile, and markets nervous, I would say we are over the worst, but we are not out of the woods. Our markets - Asia, Africa and the Middle East - are bouncing back. But to sustain that momentum they need the West to grow too. Whilst the global financial crisis was actually a Western financial crisis, it was big enough to impact everywhere. We live in an extraordinarily interconnected and interdependent world.

What is clear is that whatever happens, Asia will grow faster than the West. Indeed the crisis has accelerated the shift in economic power and influence from those who consume and borrow, to those who produce and save. With our focus on Asia, Africa and the Middle East, it is clear that we are in the right markets.

Asia - a platform for growth

The pace of the recovery in Asia has been remarkable. Asian exports have grown, on average, over 37 per cent year-on-year. Several of the most trade-dependent economies, such as Taiwan and Singapore, have seen double-digit GDP growth - and are now ahead of pre-crisis levels of activity. More domestically driven economies such as China and India continue to grow at pace.

Underpinning this growth are increasingly diversified trade and investment flows. Everyone talks about the China-Africa trade and investment corridor, but there is a profusion of non-traditional corridors: Korea and the Middle East; India and Africa; China and Brazil. Trade within the ASEAN (Association of South East Asian Nations) region now accounts for over a quarter of Indonesia's exports, and more than a third of Thailand's, Malaysia's and Singapore's. All of these markets now export more to the rest of ASEAN than they do to China.

Given our network and capabilities, these trends play to our strengths. For example, Hyundai Motor, a leading Korean car manufacturer, set up a state-of-the-art production facility in Chennai, India. Building on a long established relationship with Hyundai Motor and our on-the-ground capabilities in India we financed the building of the factory, provided banking services to many of the suppliers - both in Korea and locally - as well as auto-financing, working capital, foreign exchange hedging and cash management services. This illustrates the power of our network, the breadth of our product offering, and how we operate as 'one bank'.

Strategy

As we emerge from the crisis, we have taken stock of our strategy, asking ourselves whether it's still right, still robust in the face of the fundamental shifts in the global economy, the avalanche of regulatory reforms, and the changes in competitive dynamics.

The answer is that we have the right strategy. It worked before the crisis. It worked during the worst of the crisis. And it's working now. We aspire to be the world's best international bank, leading the way in Asia, Africa and the Middle East - parts of the world that offer great prospects for growth, that we know intimately, and where we have deep roots. These are the right markets for us. We focus on customers and clients, on building deep, long-term relationships, on standing beside them through thick and thin. We are obsessive about the fundamentals of the Bank: the balance sheet, our infrastructure, our brand and reputation, our culture. We are equally obsessive about the way we run the Bank - how we manage costs, risk, liquidity, capital and controls. We believe investment in organic growth is the key to driving sustained value creation. Acquisitions and investments play an important part in our strategy - giving us new capabilities, creating new platforms, or overcoming obstacles to growth - but organic growth has been and will be the main driver of our success. Our approach to acquisitions can be summed up simply: we grow what we buy; we don't just buy to grow.

Inorganic investments and partnerships complement the growth of our organic business. We have a 20 per cent stake in Bohai Bank in China, which has now grown to over $25 billion in assets, and has 42 branches in 11 cities.

Most recently, we established a strategic partnership with Agricultural Bank of China (ABC), underpinned by becoming a cornerstone investor in their IPO. With 2.6 million corporate clients, over 320 million personal customers, and nearly 24,000 branches, but virtually no international network, ABC offers plenty of scope for mutually beneficial cooperation; for example, in providing international trade services to their millions of Small and Medium Enterprise (SME) clients.

Small and Medium Enterprises

Building the SME business is a key strategic priority across all our core markets, primarily because it's a great source of profit growth, but also because it's one area where we can powerfully demonstrate our distinctive contribution to the broader real economy.

SMEs are the main source of employment growth in most economies, and in several of our markets, they dominate the economy. In Korea, for example, SMEs account for over half of GDP, and 88 per cent of total employment. Helping SMEs trade, grow and prosper is an obvious way in which banks can be 'socially useful' and deliver value for their shareholders.

This is a business we have been investing in to build. Today, we have SME customers in 30 markets, who are served by 1,300 relationship managers. Consistent with our commitment to the segment, we continued to expand lending during and after the crisis - SME loans grew by 14 per cent from 2008-09 and a further seven per cent in the first six months of this year to $14.2 billion. Meanwhile SME deposits have grown from $17 billion to $29 billion since the beginning of 2008, with 17 per cent growth in the first six months of 2010.

This growth has been achieved by investing in product capabilities and dedicated SME centres, and in recruiting and training relationship managers. However, we are also looking to complement our organic growth through selective acquisitions. For example, last month we acquired a factoring and hire purchase business in Singapore - a small, but targeted, acquisition that extends our product capabilities for SME customers.

Corporate Finance

Our corporate finance business represents another good example of where we have combined investment in our organic business with carefully selected acquisitions that expand our capabilities.

The strategic rationale for building our corporate finance business from scratch, and quickly, was clear. We had great relationships with our clients, but we didn't have the product capabilities to take advantage of the growth in infrastructure, trade and investment flows emerging in our geographies. We needed to deepen our relationships with core clients and conduct more 'high end' advisory and finance business in order to take advantage of these growing flows. Alongside the process of hiring and building the business, select acquisitions were crucial: Harrison Lovegrove in the Oil and Gas sector, Cazenove Asia - now Standard Chartered Securities - on the equities side, Pembroke for the build out of our aircraft financing offering, and First Africa provided boutique advisory capability in Africa. The momentum in the business is self-evident. In seven years, we have built a business that has seen income grow from $40 million in 2003 to $932 million in the first half of this year. First half income is up 52 per cent on the first half of last year, driven by ever larger mandates, and is up 37 per cent on the second half of last year. This is a very strong performance, and now forms a significant contribution to our client business.

Corporate finance is a business where we had chosen to invest for growth and we are now seeing the benefit.

Of course, building businesses like SME or corporate finance, or expanding organically in markets like China, takes sustained investment, and while some of this can be funded through productivity enhancement, the pace of investment drives cost growth.

Investing in the business

We have consistently said that we manage the bank so that our costs grow broadly in line with income. Last year we responded to the global economic turmoil by pulling back on costs sharply, and they grew significantly less than income. This year we decided to accelerate investment spending to ensure we took full advantage of the opportunities emerging from the crisis.

The margin pressure on deposits, and the sharp reduction in own account income year-on-year somewhat disguises the underlying business momentum, the pace at which we are winning market share - in most segments and products across most markets - and building volumes. We are investing to ensure we have the scalable infrastructure to enable us to continue to grow at pace in a controlled and cost-effective manner. If you look at our jaws or cost income ratio over a multi-year period we are doing exactly what we said we would do - keeping costs growing broadly in line with income.

We have deliberately stepped up our investment to transform Consumer Banking. Expenses in Consumer Banking climbed ten per cent during the first half, as we added 400 relationship managers across Premium Banking, Private Banking and SME, and some 700 front line sales and service staff. We also continued to invest in our branches and in enhancing our internet and mobile channels.

And while we still have much to do in Consumer Banking, and still face downward pressure on margins, we are getting the results. For example, in Hong Kong, mortgage volumes have grown 25 per cent year-on-year, giving us around 15 per cent market share, our highest ever. Deposits have grown by ten per cent, much faster than the market. As interest rates begin to rise - which they are just beginning to do - we will see the benefits of what we have done to build the scale and quality of our customer deposits across our markets in the income line.

Another area in which we have stepped up investment with an eye to our long term growth is in branding and marketing.

Our brand

We have a great brand, but it could be a much more powerful driver of value creation. So far, our brand has been propelled by the success of our business, rather than helping drive our success. We want to make the brand far more potent as a source of competitive advantage.

This is not about throwing money around to achieve nebulous goals, but about controlled investment to achieve specific objectives:

• First, we want many more people, across all our markets, to be aware of the brand. Our brand recognition is just far too low.

• Second, we need them to understand what we stand for and why we are different. Because we really believe we are a different kind of bank.

• And finally, investment in the brand must drive incremental business.

Our sponsorship of Liverpool Football Club is all about building basic brand awareness. Given the number of people watching the English Premier League every week across Asia, Africa and the Middle East, and the extent of Liverpool's global fan base, we reckoned this was the most cost-effective way of putting our name on the TV in all our markets every week.

With the launch of our brand promise 'Here for good' we're telling the world what we stand for and why we're different. 'Here for good' is a simple phrase with multiple meanings. It captures our long term perspective, the fact that we're committed to clients and customers, to our markets and the communities in which we live and work. We've been around for a long time, and we'll stick around, through good times and bad. 'Here for good' also captures our belief in doing the right thing, in being a force for good, in making a positive contribution to the economies and societies in which we operate. At one level, it is about community initiatives, but even more profoundly, it's about the way we run our business every day and everywhere - what clients we take on, what products we sell, how we conduct ourselves.

India

India was our second most profitable market in 2009, beaten by just a whisker by Hong Kong. But in 2010, India is certainly ahead at the halfway mark, with profits up 19 per cent to $624 million. Both our consumer and wholesale businesses have great momentum, and we're continuing to invest to make the most of the opportunities. It's worth reflecting that in 2000, the year before we acquired Grindlays, our profits in India were only $45 million; and those of Grindlays, $90 million.

From my many visits to India, it is clear what a difference the listing has made to our brand and profile. For us, the IDR listing is a symbol of how we are 'Here for good' in India. We've been in India for over 150 years. Our first ever two branches were opened in Kolkata and Shanghai in 1858. We've now become the first - indeed the only - international company to list in Mumbai. We're enormously appreciative of the support of our new investors in India.

Outlook

These results demonstrate once again our commitment to delivering consistent and sustained performance. This is not a bounce back, a sharp recovery in profits; it is simply another set of record results, continuing a trajectory that now extends over more than seven years.

I would like to take this opportunity to thank the people of Standard Chartered for once again delivering for our shareholders.

Both businesses enter the second half with good momentum. However, we remain extremely watchful about the global outlook and are managing the business very dynamically. We are investing now in order to grasp the huge long term opportunities across our markets. But we are also ready and able to respond tactically as events unfold. We don't underestimate the scale and unpredictability of the external challenges. In this context, we have kept focused on the basics, kept driving the underlying momentum in both our businesses, and have stepped up investment in the brand.

In the second half, Consumer Banking income should benefit from continued balance sheet growth and selective re-balancing of the loan book. We are well positioned for the turn in the rates cycle, but now expect this to have the most impact in 2011.

Wholesale Banking client income remains strong and our deal pipelines remain both robust and active.

For the Group as a whole, we would expect to see jaws narrowing from eight per cent negative in the first half, but we still anticipate negative jaws at the full year. We are keeping a tight grip on expenses. Credit indicators in both businesses remain good.

The Bank is in great shape, has good momentum, and is superbly positioned for the future.

Peter Sands

Group Chief Executive

4 August 2010

Standard Chartered PLC - Financial review

Group summary

The Group has delivered another strong performance for the six months ended 30 June 2010. Operating profit rose 10 per cent to $3,116 million. On a constant currency basis¹, the increase in operating profit was 6 per cent.

Operating income fell marginally by $36 million to $7,924 million compared to the corresponding period last year, but grew 10 per cent over the second half of 2009. Income grew by 3 per cent over the first half of 2009 excluding the gain of $248 million generated from the buyback of Tier 2 notes in April 2009. Consumer Banking grew income by 8 per cent and client income in Wholesale Banking grew by 18 per cent. Own account income fell from the very strong levels seen in the first half of 2009, but showed good growth of 14 per cent over the second half.

Normalised earnings per share grew 10 per cent to 104.9 cents and return on equity was 14.7 per cent. Further details of basic and diluted earnings per share are provided in note 9 on page 68.

Expenses continue to be managed tightly whilst still investing in both businesses to underpin income momentum. The increase over the first half of 2009 reflects our decision to hold back on investment expenditure in the first half of 2009 due to the uncertain environment at that time. With economies starting to improve in the latter half of 2009, we invested in people and infrastructure with a resultant flow through of expenses in the current year. This, coupled with the softness seen in own account income in the current year, has resulted in a normalised cost to income ratio of 54.3 per cent compared to 49.6 per cent in the first half of 2009, and cost growth exceeded income growth by 8 per cent.

The Group's overall asset quality remains good. The stress on asset quality seen in the early part of 2009, in line with that seen in the wider industry, has moderated considerably in both businesses and most geographies. Additionally, a disciplined and proactive approach to risk, has delivered a significant reduction in impairment provisions.

We continue to focus on the foundations of good banking with particular emphasis on liquidity and capital. We maintain a liquid balance sheet, with an advances to deposits ratio of 76.2 per cent, compared to the 2009 year end ratio of 78.6 per cent. We also continue to maintain a conservative funding structure with all debt maturity requirements for 2010 pre-funded and with very low levels of refinancing necessary over the next few years. Both businesses have focused on growing deposits through product and service innovation and enhancement of their partnering efforts to drive acquisition of payroll accounts.

We continue to maintain a strong capital position with a Core Tier 1 ratio of 9 per cent at 30 June 2010. In the first half of the year the Group generated $2.1 billion of organic equity primarily as a result of strong profitability. In addition, we raised some $504 million, net of expenses, through a listing of Indian Depository Receipts on the Bombay and National stock exchanges in India.

Acquisitions

On 12 April 2010 the Group completed the purchase from GE Capital Hong Kong of its consumer finance business in Hong Kong. The effect of this acquisition was not material to the Group's performance in the first half of 2010.

In the commentary below all comparisons are made in relation to the first half of 2009 unless otherwise stated.

Operating income and profit
		6 months ended	6 month ended	6 months ended	H1 2010 vs	H1 2010 vs
		30.06.10	30.06.09	31.12.09	H1 2009	H2 2009
		$million	$million	$million	%	%
Net interest income		4,155	3,700	3,923	12	6
Fees and commissions income, net		2,148	1,685	1,685	27	27
Net trading income		1,351	1,740	1,150	(22)	17
Other operating income		270	835	466	(68)	(42)
		3,769	4,260	3,301	(12)	14
Operating income		7,924	7,960	7,224	(0)	10
Operating expenses		(4,344)	(4,027)	(3,925)	8	11
Operating profit before impairment losses and taxation		3,580	3,933	3,299	(9)	9
Impairment losses on loans and advances and other credit risk provisions		(437)	(1,088)	(912)	60	52
Other impairment		(50)	(15)	(87)	(233)	43
Profit from associates		23	8	13	188	77
Profit before taxation		3,116	2,838	2,313	10	35


¹	Unless otherwise specified, constant currency change is derived by applying a simple translation of the previous period functional currency number in each entity using the current average and period end US dollar exchange rates to the income statement and balance sheet, respectively.

Group performance

Net interest income grew by $455 million, or 12 per cent, with higher volumes offsetting margin pressure. The Group net interest margin at 2.3 per cent was down from 2.4 percent in the first half of 2009. Both businesses continued to be impacted by liability margin pressures as interest rates remain low and uncertainty on sustained recovery persists, especially in the western economies with a knock on impact in some of our markets. Consumer Banking has seen good balance sheet velocity for both assets and liabilities. Higher volumes helped offset the fall in deposit margins and the impact of the shift to secured but lower yielding asset growth. In Wholesale Banking, margin compression, especially in the Cash business, was offset by an increase in Trade volumes, where we gained incremental market share.

Non-interest income, which comprises net fees and commissions, trading and other operating income fell $491 million, or 12 per cent, to $3,769 million. Excluding the gain of $248 million on buy back of Tier 2 notes in the first half of 2009, non interest income was $243 million, or 6 per cent, lower as a result of softer own account performance. Net fees and commission income increased by $463 million, or 27 per cent, to $2,148 million. In Consumer Banking, this was driven by better Wealth Management performance on the back of improved market sentiment and an increase in sales of mutual funds and structured products. In Wholesale Banking, the increase was driven by higher Corporate Advisory fees. Net trading income fell by $389 million, or 22 per cent, to $1,351 million as lower volatility limited trading opportunities. Other operating income primarily comprises gains arising on sale from the investment securities portfolio, aircraft lease income and dividend income. This income fell by $565 million, or 68 per cent, to $270 million as 2009 included gain arising from the buy back of own debt of $248 million, which did not repeat in the current year. Consumer Banking non interest income registered a $121 million increase benefitting from increased Wealth Management sales as market sentiment, although cautious, turned more positive. In Wholesale Banking, Corporate Finance performed very strongly on the back of some landmark deals and Transaction Banking benefitted from increased volumes. Own account income, however, was adversely impacted as volatility in our markets was low and offered few opportunities. The Group's income streams continue to be highly diversified with most geographies showing a positive growth. Americas UK and Europe was flat having benefitted in the first half of 2009 through the gain arising from the buy back of own debt.

Operating expenses increased by $317 million, or 8 per cent, to $4,344 million. Expenses in the first half of 2009 included $170 million related to the buy back of structured notes issued by the PEM Group in Taiwan which were partially offset by a reduction in retirement obligations of $52 million. Excluding these, costs were higher by 11 per cent. Both businesses continued to invest in specialist and front line staff and in infrastructure spend on new branches, renovations and relocations of branches, distribution channels such as ATMs and technology systems.

Operating profit before impairment losses and taxation (also referred to as "working profit") fell $353 million, or 9 per cent, to $3,580 million. On a constant currency basis, the decrease was 12 per cent.

Loan impairment was lower by $651 million, or 60 per cent, at $437 million. The challenging credit environment seen in early 2009 has continued to ease, resulting in lower delinquency trends since the second half of 2009 and consequent lower provisions, both at a specific and portfolio level. Flow rates and impairment in Consumer Banking have continued to improve in the first half of 2010 as the environment improved. Wholesale Banking has also seen an improvement in credit grade migration and early alerts with resultant lower provisions, which related mainly to incremental provisioning on a few existing problem accounts.

Profit before taxation increased by $278 million, or 10 per cent, to $3,116 million with Consumer Banking contributing 21 percent of the Group's first half profit, up from 12 per cent in the first half in 2009. On a geographic basis, India surpassed Hong Kong as the leading contributor.

The Group's effective tax rate (ETR) was 30 per cent compared to 29.8 per cent in the first half of 2009. Based on the underlying profit mix of the Group, generally, the full year ETR is expected to be in the range of 28 per cent to 29 per cent. The ETR in the first half of the year is higher than this range because of profit mix and the impact on deferred tax balances of a change in corporate tax rates, principally in Taiwan.

Consumer Banking
The following tables provide an analysis of operating profit by geography for Consumer Banking:
	6 months ended 30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Consumer Banking Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Operating income	523	333	510	704	251	344	183	64	2,912
Operating expenses	(351)	(172)	(389)	(486)	(157)	(221)	(121)	(69)	(1,966)
Loan impairment	(22)	(15)	(60)	(59)	(41)	(87)	(12)	(3)	(299)
Other impairment	-	-	-	-	-	-	(2)	(2)	(4)
Operating profit/(loss)	150	146	61	159	53	36	48	(10)	643

	6 months ended 30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Consumer Banking Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Operating income	545	302	423	612	213	337	168	85	2,685
Operating expenses	(265)	(140)	(318)	(557)	(115)	(196)	(105)	(84)	(1,780)
Loan impairment	(58)	(19)	(116)	(120)	(77)	(143)	(18)	(12)	(563)
Other impairment	5	-	-	-	3	-	-	(2)	6
Operating profit/(loss)	227	143	(11)	(65)	24	(2)	45	(13)	348

	6 months ended 31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Consumer Banking Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Operating income	537	333	572	671	231	341	183	76	2,944
Operating expenses	(339)	(157)	(383)	(489)	(133)	(199)	(124)	(105)	(1,929)
Loan impairment	(46)	(15)	(69)	(120)	(70)	(142)	(10)	(17)	(489)
Other impairment	-	-	(1)	(2)	2	-	-	(6)	(7)
Operating profit/(loss)	152	161	119	60	30	-	49	(52)	519

An analysis of Consumer Banking income by product is set out below:
							6 months ended	6 months ended	6 months ended
							30.06.10	30.06.09	31.12.09
Operating income by product							$million	$million	$million
Cards, Personal Loans and Unsecured Lending							988	954	1,038
Wealth Management and Deposits							1,106	1,100	1,132
Mortgages and Auto Finance							733	540	704
Other							85	91	70
Total operating income							2,912	2,685	2,944

Consumer Banking continued

Consumer Banking continued to make progress in executing its shift towards becoming more customer focused. Operating income grew by $227 million or 8 per cent to $2,912 million. On a constant currency basis, income was 3 per cent higher. Net interest income increased $106 million, or 6 per cent, to $1,981 million. Whilst asset and liability volumes increased, this was partially offset by lower margins. Compared to the first half of 2009, margins, on average, fell 27 basis points on deposits as the low interest rate environment persisted and 7 basis points on assets as growth was primarily in lower yielding secured products. Non interest income at $931 million was 15 per cent higher driven by Wealth Management fees which have grown steadily, although investor confidence remains cautious as evidenced by a slowdown in momentum following the recent economic events in Europe.

Expenses increased $186 million, or 10 per cent, to $1,966 million. On a constant currency basis, expenses were up 4 per cent. Expenses were driven higher by investment expenditure, primarily hiring relationship managers and front office staff, new branches and ATMs, and also increased regulatory costs.

Loan impairment was lower by $264 million, or 47 per cent, at $299 million. Delinquency rates have continued to improve since the second half of 2009 with an easing in the economic environment and this, coupled with the de-risking of the loan portfolio, has helped impairment levels reduce across all geographies. We remain cautious in some markets such as UAE.

Operating profit increased by $295 million, or 85 per cent, to $643 million. On a constant currency basis, the increase in operating profit was 82 per cent.

Product performance

Income from Cards, Personal Loans and Unsecured Lending increased by $34 million, or 4 per cent, to $988 million. In the face of worsening delinquency trends in late 2008 and early 2009, we de-risked our portfolios, reducing emphasis on unsecured products. With flow rates improving in the latter half of 2009, we have been selectively returning to unsecured lending with a small increase in income from this product stream.

Wealth Management and Deposits income was broadly flat. With a low interest rate environment continuing for a longer period than expected, deposit margins continued to be under pressure and this was further exacerbated by pricing competition in key markets. We continued our deposit gathering initiatives driven by product innovation and continued focus on co-operation with Wholesale Banking to source payroll accounts. We continue to strategically drive the deposit mix. In 2009, the focus was on increasing Current and Savings accounts (CASA) and reducing expensive term deposits. With rates continuing to be steady and an upward bias expected in some markets, the focus more recently has been to grow longer term deposits and encourage rollover of maturities at lower rates. Total deposits grew by $11 billion to $130 billion and helped partially offset margin compression. Wealth Management has shown some recovery and grew in the first few months of 2010. Our focus continued on markets in Asia, where investor appetite was higher on the back of relatively better economic and stock exchange indicators.

Mortgages and Auto Finance grew strongly against the first half of 2009, with income up $193 million, or 36 per cent, to $733 million driven by higher volumes and improved margins. However, compared to the second half of 2009, margins fell due to an increase in funding costs and the impact of increased competition on pricing. This was partially offset by continued good volume growth, particularly in Hong Kong.

The "Other" classification primarily includes SME related trade and transactional income and has remained at similar levels compared to the previous period.

Geographic performance

Hong Kong

Income was down $22 million, or 4 per cent, to $523 million. Hong Kong is our most liquid market. The low interest rate environment coupled with market competition put margins under pressure and interest income fell compared to the first half of 2009. The margin impact was partially offset by an increase in volumes across both liability and asset products. We continued to gain market share in both mortgages and credit cards whilst also growing the SME trade book. Liability growth continued to be driven through innovative programs such as MaxiRewards and variants such as Renminbi (RMB) deposits in addition to on-going efforts with Wholesale Banking to grow payroll accounts. Non funded income has grown steadily since the first half of 2009 driven primarily by unit trust sales and securities brokerage. In line with the trend across the Group, investment was held back in the first half of 2009. With income momentum improving in the second half of 2009, the business invested in front office staff and enhanced internet and mobile infrastructure, resulting in higher expenses in the current period, up 32 per cent to $351 million. Working profit was down $108 million, or 39 per cent, to $172 million. Impairment was lower by $36 million as personal bankruptcies fell by around 50 per cent in an improving economic climate and increased security related to the SME portfolio. Operating profit was down $77 million, or 34 per cent, to $150 million.

Singapore

Income was up $31 million, or 10 per cent, to $333 million. On a constant currency basis, income was up 5 per cent. Income from mortgages and cards benefitted from customer-centric innovation focused on enhancing transactional capabilities such as Breeze, Pay Any Card and the "8 minute service guarantee". Wealth Management income grew on the back of increased sales of structured notes as markets and investor appetite recovered. Low interest rates and increased competition impacted deposit margins adversely but were partially offset by increased volumes. Operating expenses increased $32 million, or 23 per cent, to $172 million, driven higher by investment in frontline marketing and branch relocations and refurbishments. Working profit was flat at $161 million. Loan impairment was marginally lower at $15 million as the economic environment improved. Operating profit was broadly flat at $146 million.

Korea

Income was up $87 million, or 21 per cent, to $510 million. On a constant currency basis, growth was 3 per cent. Income grew in Mortgages, Unsecured Lending and Wealth Management, and although liability volumes were higher this was largely offset by lower deposit margins. Operating expenses were up $71 million, or 22 per cent, to $389 million. On a constant currency basis, expenses were 5 per cent higher. Expenses were driven higher by investment in refurbishing and renovating existing branches and the opening of 10 new branches in the first half of this year.

Consumer Banking continued

Working profit was up 15 percent, but 2 percent lower on a constant currency basis at $121 million. Loan impairment was down $56 million, or 48 per cent, to $60 million as bankruptcies and debt restructuring reduced. This was further helped by the benefits of a de-risked portfolio flowing through. Operating profit was $61 million, up $72 million from the $11 million loss in the first half of 2009.

Other Asia Pacific

Income was up $92 million, or 15 per cent, at $704 million. All major markets except Thailand registered positive income growth. Income in China was up 27 per cent to $98 million driven by strong volume growth in personal loans and mortgages, improved liability margins and increased fee income on the back of higher sales of mutual funds and structured notes. Taiwan saw a 16 per cent increase in income with strong growth in Mortgages and Wealth Management momentum, primarily unit trust and mutual fund sales. In Thailand, income reduced as the political unrest impacted business sentiment and we continued to de-risk the portfolio. Income in Malaysia was up 6 per cent to $128 million and benefitted from growth in assets, primarily SME and Mortgages. Operating expenses in the first half of 2009 included a $170 million charge in Taiwan for the buy back of structured notes issued by the PEM Group which were partially offset by a reduction in retirement obligations of $52 million. Excluding these items, expenses were up $47 million, or 11 per cent, at $486 million primarily driven by investments in frontline staff, branch infrastructure and ATMs. Working profit was up $163 million to $218 million. Loan impairment fell $61 million, or 51 per cent, to $59 million. Taiwan and Thailand saw a significant reduction in impairment as actions taken to de-risk the portfolios coupled with enhanced collection efforts took effect. This geography delivered an operating profit of $159 million as compared to a loss of $65 million in the first half of 2009.

India

Income was up $38 million, or 18 per cent, to $251 million. On a constant currency basis, income grew 10 per cent. This was driven by the continuing momentum in focus segments such as Private Banking and Priority Banking since the second half of 2009. Mortgages and SME saw good growth in volumes and benefitted from an increase in margins. Wealth Management benefitted from a more buoyant stock market resulting in higher mutual fund sales. As in other major markets, deposits growth was driven by the focus on payroll accounts which helped CASA balances grow 2 per cent over the previous year end. Operating expenses were $42 million, or 37 per cent, higher at $157 million. On a constant currency basis, expenses were higher by 26 per cent. The first half of 2009 had benefitted from a service tax rebate. The underlying increase in expenses was driven by continued investments to support future growth and build the franchise including front office staff and Relationship Managers, increased brand visibility and ATM expansion. Working profit was down $4 million, or 4 per cent, at $94 million. On a constant currency basis, the drop in working profit was 10 per cent. Loan impairment was down $36 million, or 47 per cent, to $41 million as a result of the shift towards secured lending. Operating profit grew $29 million, or 121 per cent, to $53 million. On a constant currency basis, operating profit was 118 per cent higher.

MESA

Income was up $7 million, 2 per cent at $344 million. Amongst the major markets in this geography, whilst UAE income grew 6 per cent, Pakistan income fell 6 per cent due to lower customer lending and compressed margins although this was partially offset by strong deposit growth. UAE income was helped by a stronger Wealth Management performance partially offset by a reduction of the high-yield personal loan portfolio in light of the economic stress and tighter underwriting criteria. Growth in focus segments such as Private Banking and Priority Banking was strong but liability margins continued to be under pressure in a low interest rate environment with increased competition. Operating expenses in MESA were higher by $25 million, or 13 per cent, at $221 million primarily driven by UAE where expenses were up by $20 million, or 26 per cent, as the business continued to invest in frontline staff and realignment of distribution channels. Expenses in Pakistan were held flat as the business continued to maintain a strong cost discipline, phasing investments in line with income momentum. Working profit was down $18 million, or 13 per cent, to $123 million. Loan impairment was lower at $87 million, 39 per cent down from $143 million in the first half of 2009. Whilst the decrease was primarily in the UAE and Pakistan, all markets benefitted from an improving economic climate coupled with the shift to secured lending products. Despite a drop in income, Pakistan, through its cost discipline and lower impairment resulting from improved delinquency trends, returned to profit. MESA delivered an operating profit of $36 million, compared to an operating loss of $2 million in the first half of 2009.

Africa

Income was up $15 million, or 9 per cent, at $183 million. On a constant currency basis, income grew 6 per cent with strong momentum in SME and Personal Loans. With the exception of smaller markets, such as Tanzania and Gambia, all other markets registered positive income growth. Uganda and Zambia saw asset growth in SME and Personal Lending whilst liabilities grew across all markets. Nigeria and Kenya gained market share across asset and liability products. Operating expenses were $16 million, or 15 per cent, higher at $121 million. On a constant currency basis, expenses were higher by 13 per cent. Expenses were driven by investments to strengthen the distribution network. Working profit was flat at $62 million. Loan impairment was down $6 million, or 33 per cent, to $12 million. Operating profit was up $3 million, or 7 per cent, at $48 million. On a constant currency basis operating profit was up 3 per cent.

Americas, UK & Europe

Income fell $21 million or 25 per cent from $85 million to $64 million. The business in this region is primarily Private Banking in nature and continued to be impacted by low investor confidence resulting in AUM reduction with a corresponding income decline. Low interest rates resulted in a squeeze in liability margins. Operating expenses fell $15 million, or 18 percent, as restructuring initiatives undertaken in 2009 started to show results. Impairment was lower by $9 million or 75 percent. The operating loss reduced from $13 million to $10 million largely driven by cost efficiencies.

Wholesale Banking
The following tables provide an analysis of operating profit by geography for Wholesale Banking:
	6 months ended 30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Wholesale Banking Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Operating income	668	580	286	837	760	712	463	706	5,012
Operating expenses	(305)	(305)	(129)	(409)	(187)	(294)	(202)	(526)	(2,357)
Loan impairment	(3)	(2)	(69)	(30)	(2)	(29)	5	(8)	(138)
Other impairment	1	-	-	(1)	-	(25)	(3)	(18)	(46)
Operating profit	361	273	88	397	571	364	263	154	2,471

	6 months ended 30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Wholesale Banking Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Operating income	678	581	282	902	691	806	390	697	5,027
Operating expenses	(302)	(290)	(121)	(375)	(172)	(267)	(164)	(556)	(2,247)
Loan impairment	(30)	(4)	(69)	(71)	(20)	(317)	(6)	(8)	(525)
Other impairment	5	-	-	14	3	-	-	(28)	(6)
Operating profit	351	287	92	470	502	222	220	105	2,249

	6 months ended 31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Wholesale Banking Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Operating income	610	376	277	703	678	594	348	678	4,264
Operating expenses	(262)	(214)	(131)	(357)	(151)	(229)	(160)	(434)	(1,938)
Loan impairment	(11)	1	(24)	(84)	(34)	(209)	(20)	(42)	(423)
Other impairment	-	(40)	-	14	11	(10)	-	(51)	(76)
Operating profit	337	123	122	276	504	146	168	151	1,827

Wholesale Banking continued

		6 months ended	6 months ended	6 months ended
Operating income by product		30.06.10	30.06.09	31.12.09
Operating income by product		$million	$million	$million
Lending and Portfolio Management		465	412	437
Transaction Banking		1,282	1,272	1,265
Global Markets¹
Financial Markets		1,711	2,036	1,275
Asset and Liability Management ('ALM')		488	557	406
Corporate Finance		932	615	679
Principal Finance		134	135	202
Total Global Markets		3,265	3,343	2,562
Total operating income		5,012	5,027	4,264

		6 months ended	6 months ended	6 months ended
Financial Markets operating income by desk		30.06.10	30.06.09	31.12.09
Financial Markets operating income by desk		$million	$million	$million
Foreign Exchange		646	831	518
Rates		512	573	306
Commodities and Equities		165	236	153
Capital Markets		233	226	183
Credit and Other		155	170	115
Total Financial Markets operating income		1,711	2,036	1,275

¹	Global Markets comprises the following businesses: Financial Markets (foreign exchange, interest rate and other derivatives, commodities and equities, debt capital markets, syndications); ALM; Corporate Finance (corporate advisory, structured trade finance, structured finance and project and export finance); and Principal Finance (corporate private equity, real estate infrastructure and alternative investments).

Wholesale Banking has delivered a robust financial performance in a challenging environment. We have continued to focus on deepening client relationships, using our network capabilities as a source of differentiation, and a disciplined approach to managing the cost base and the balance sheet. Client income has grown strongly at 18 percent with broad based growth across product lines. This has largely helped offset the fall in own account income. Income was broadly flat at $5,012 million. Net interest income was up $349 million, or 19 per cent, to $2,174 million with volumes in Lending and Trade helping offset lower margins in Cash. Non-interest income was lower by $364 million, or 11 per cent, at $2,838 million. Client income continued to be significant at over 80 per cent of total income.

Corporate Finance delivered a 52 percent increase in income compared to the first half of 2009 with a continuing stream of landmark deals, especially in India and Africa. Financial Markets performance was adversely impacted as market conditions were much less favourable than the first half of 2009. Reduced volatility and spreads coupled with increased competition offset volume gains. Volume growth was driven across product lines through our focus on strategic and transactional client opportunities. Own account income was down 40 per cent compared to the exceptional levels in the first half of last year, although it has grown 14 per cent against the second half of 2009. Interest and exchange volatility was low due to strong government and regulator interventions in most markets and a low interest rate environment offered limited trading opportunities. Asset and Liability Management (ALM), which benefitted in early 2009 from higher yielding assets, has seen a churn in early 2010 with replacements at lower yields in a falling interest rate environment.

Operating expenses were up $110 million, or 5 per cent, to $2,357 million. The increase was largely driven by higher regulatory costs, investments in systems and infrastructure and the flow through in staff costs arising from prior year initiatives on resourcing in specialist areas such as sales, trading and financial institutions teams. Other increases were driven off a tightly controlled prior year first half in view of the uncertain outlook at the beginning of 2009. These increases have been partially offset by lower bonus accruals reflecting lower Global Market income and increased deferral rates.

The negative jaws of 5 per cent have resulted in a drop in working profit of $125 million, or 4 per cent, to $2,655 million.

Impairment was significantly lower by $387 million at $138 million. Impairment in the first half of 2010 has related mainly to incremental provisioning on a few existing problem accounts, particularly related to the Korean shipbuilding sector. There have been no new material impairments in the first half of the year. The portfolio remains well diversified and well collateralised.

Operating profit increased $222 million, or 10 per cent, to $2,471 million and constitutes nearly 80 per cent of the Group's operating profit.

Wholesale Banking continued

Product performance

Lending and Portfolio Management income increased by $53 million, or 13 per cent, to $465 million driven by an increase in lending volumes, related fee income and improved margins through re-pricing.

Transaction Banking income was flat at $1,282 million. Income from Trade grew 11 per cent on the back of a 26 per cent increase in volumes compensating for a squeeze in margins as competition increased. The Cash business was significantly impacted by a 43 basis point drop in margins due to the effect of aggressive interest rate cuts since the latter half of 2009 and income was 9 per cent lower than the first half of 2009. However, a 24 per cent increase in liabilities and a 25 per cent growth in transaction volumes helped gain market share and partially offset the impact of falling margins. Securities income grew 21 per cent as the increase in Assets under Administration (AUA) and related fees helped offset the drop in interest as liability balances fell13 per cent.

Global Markets income fell by $78 million, or 2 per cent, to $3,265 million.

Within Global Markets, the Financial Markets (FM) business, whilst continuing to be the largest contributor, saw income falling $325 million, or 16 per cent, to $1,711 million. The FM business primarily comprises sales and trading of exchange and interest rate products and over the period has seen diversification of income streams, with increased contributions from commodity, equity and credit derivatives. Over 75 per cent of this income was client driven arising from client flows and their hedging requirements, which we supported through our upgraded risk management capabilities.

FM Sales and Trading income was adversely impacted in the first half of 2010 by spread compression, increased competition and less volatile market conditions providing fewer opportunities. Income in the Foreign Exchange and Rates businesses, whilst lower than the first half of 2009, was higher than the latter half of 2009 with higher volumes helping to partially offset the margin compression. The Commodities business saw a fall in income as reduced volatility resulted in a drop in customer flows. The Equities business whilst benefitting from increased flows was adversely impacted by mark downs as global equity markets fell in the second quarter of 2010.

ALM income was $69 million, or 12 per cent, lower at $488 million. This was primarily driven by high yielding positions maturing which have been replaced by lower yielding securities.

Corporate Finance income was up $317 million, or 52 per cent, to $932 million with strong income growth across all products. Much of the growth was in Corporate Advisory, driven by deals across our footprint and further client penetration in India and Africa.

Principal Finance income was broadly flat at $134 million with higher recoveries and sales of distressed debts partially offsetting lower gains in private equity. As Asian market prices rose in the first half of 2009, our private equity business gained from both upward marks and disposals. This did not replicate to the same extent in this period.

Geographic performance

Hong Kong

Income was down $10 million, or 1 per cent, to $668 million. Client income was up 16 per cent driven by an increase in Lending and Trade volumes coupled with proactive re-pricing of the Lending book. Corporate Finance benefitted from advisory and structured finance deals and the Custody business also saw an increase in volumes although this was partially offset by shrinking margins in the Cash business in a low interest rate environment. The increase in Client income was offset by a decline in own account income and downward marks on convertible bonds as credit spreads widened in the second quarter of 2010. Operating expenses were up $3 million, or 1 per cent, to $305 million with an increase in salaries and infrastructure being offset by lower bonus accruals on the back of depressed trading performance. Working profit was down $13 million, or 3 per cent, to $363 million. Impairment was negligible in the current period resulting in an increase in operating profit to $361 million, compared to $351 million in the prior period.

Singapore

Income was broadly flat at $580 million with Client income growth offset by the drop in own account income. Client income benefitted from increased trade finance, structured corporate finance deals and increased lending volumes. Trading income was however adversely impacted due to decreased market volatility and tighter margins. Operating expenses grew $15 million, or 5 per cent, to $305 million driven by staff costs arising from flow through of previous year investment in specialist teams in areas such as commodities, options and interest rate derivatives. Working profit fell by $16 million or 5 per cent, to $275 million. Operating profit was lower by $14 million, or 5 per cent, at $273 million.

Korea

Income was flat. On a constant currency basis, income was 15 per cent lower. Client income grew 3 per cent on a headline basis but declined on a constant currency basis due to margin compression as liquidity levels increased and competition returned to the market. Own account had record income in the first half of 2009 due to market volatility and the absence of liquidity. In contrast, the current half year was relatively stable and trading opportunities were limited. Operating expenses were higher by $8 million, or 7 per cent, at $129 million primarily driven by investment related to the securities business. On a constant currency basis, expenses were lower by 8 per cent. Working profit was lower by $4 million, or 2 per cent, at $157 million. On a constant currency basis, working profit fell 20 per cent. Loan impairment was flat at $69 million, mainly relating to additional provisions on a small number of specific exposures primarily in the ship building sector. Operating profit was marginally lower by $4 million, or 4 per cent, at $88 million. On a constant currency basis, operating profit fell 23 per cent.

Wholesale Banking continued

Other Asia Pacific

Income was down $65 million, or 7 per cent, at $837 million. All major markets in this region were impacted by a fall in own account income due to lower volatility resulting in reduced trading opportunities. The first half of 2009 saw private equity gains in China which have not replicated in the first half of 2010. Across the region, Client income was strong through higher trade and lending volumes and structured transactions by the Corporate Finance team. Excluding the private equity gains, China delivered income growth of 9 per cent on the back of higher Trade and Lending volumes and improved Lending and Cash margins. Income in Taiwan fell with margin compression being only partially offset by higher volumes. Malaysia income was down 6 per cent to $140 million as own account was impacted due to reduced opportunities. Operating expenses were up $34 million, or 9 per cent, to $409 million. Expenses were driven higher by staff and premises expenses and flow through from prior year investments. China operating expenses were up 15 per cent to $150 million. Working profit was lower by 19 per cent at $428 million. Impairment was down $41million at $30 million. The previous period charge had been largely driven by disputes on certain foreign exchange related transactions. Operating profit was $73 million lower at $397 million, down 16 per cent. Operating profit in China was $93 million.

India

Income grew $69 million, or 10 per cent, to $760 million. On a constant currency basis income grew 2 per cent. Client income grew, primarily driven by corporate advisory leveraging on cross border financing and deal structuring capabilities. Trade and Lending margins fell but were partially offset by higher volumes. With equity markets improving, the Custody business saw an increase in volumes which more than offset the margin compression. Operating expenses were up $15 million, or 9 per cent, driven primarily by staff costs. Working profit was up $54 million, or 10 per cent, at $573 million. On a constant currency basis, working profit grew 3 per cent. Loan impairment was lower by $18 million, driven by an improving economic environment. Operating profit was up $69 million, or 14 per cent, to $571 million. On a constant currency basis operating profit grew 6 percent.

MESA

Income was down $94 million, or 12 per cent, to $712 million with increases in Client income partially offsetting the drop in own account incomes. Client income growth was broad based with Lending, Trade and Corporate Advisory reflecting increased volumes and steady margins and Islamic banking continued to be a key focus area. UAE income was lower with the growth in local corporate segment being offset by a drop in other client segments. Bahrain saw an income drop of 35 per cent as a deteriorating credit environment in the region impacted risk appetite and business flow. Income in Pakistan fell as political and economic uncertainty impacted business sentiment. Operating expenses were up $27 million, or 10 per cent, to $294 million driven by staff and investment expenditure. Working profit was down $121 million, or 22 per cent, to $418 million. Impairment in the region, which continues to be driven by a few existing problem exposures, was significantly lower than in the first half of 2009. Operating profit at $364 million was $142 million, or 64 per cent higher.

Africa

Income was up $73 million, or 19 per cent, to $463 million. On a constant currency basis, income grew 14 per cent. Income was driven primarily by excellent Corporate Finance performance. Trade and Lending income also increased as a result of re-pricing. This helped offset a fall in Cash income where higher volumes only partially made up for margin compression. Corporate Finance benefitted from landmark deals as we continued to deepen client relationships and move up the value chain. South Africa, Ghana and Zambia drove income momentum through higher trade volumes, while Nigeria, Kenya and Zambia saw an increase in lending volumes. Operating expenses were up $38 million, or 23 per cent, to $202 million. On a constant currency basis expenses were 21 per cent higher reflecting investments in people and infrastructure. Working profit was up $35 million, or 15 per cent, to $261 million. Loan impairment benefitted in the current year with net recoveries of $5 million. Operating profit was up $43 million, or 20 per cent, to $263 million. On a constant currency basis operating profit grew 13 per cent.

Americas, UK & Europe

This region continued to support cross border business originating in other geographies and in sourcing business across the franchise. Income was marginally higher by $9 million, or 1 per cent, at $706 million. There was broad based Client income growth across Trade, Lending and Corporate Finance which offset the drop in own account income. Lending and Trade saw increased volumes with re-pricing actions, which helped offset margin compression in Cash income. In the first half of 2009, trading income benefitted from a favourable positioning of our ALM book against a declining interest rate environment. Trading opportunities were significantly lower in the current period. Foreign Exchange and Rates business was also impacted by lower spreads. Operating expenses were lower by $30 million with staff expense increases being offset through a reduction in premises costs and other efficiencies. Working profit grew $39 million or 28 per cent. Impairment was flat. Other impairment, which primarily relates to the asset backed securities (ABS) portfolio, was lower by $10 million or 36 per cent, at $18 million. Operating profit was up 47 per cent at $154 million.

Group summary consolidated balance sheet
				H1 2010 vs	H1 2010 vs	H1 2010 vs	H1 2010 vs
	30.06.10	30.06.09	31.12.09	H1 2009	H2 2009	H1 2009	H2 2009
	$million	$million	$million	$million	$million	%	%
Assets
Advances and investments
Cash and balances at central banks	29,694	12,141	18,131	17,553	11,563	145	64
Loans and advances to banks	49,390	45,366	50,885	4,024	(1,495)	9	(3)
Loans and advances to customers	215,005	182,748	198,292	32,257	16,713	18	8
Investment securities held at amortised cost	6,006	6,254	6,688	(248)	(682)	(4)	(10)
	300,095	246,509	273,996	53,586	26,099	22	10
Assets held at fair value
Financial assets held at fair value through profit or loss	24,287	16,450	22,446	7,837	1,841	48	8
Derivative financial instruments	44,555	45,823	38,193	(1,268)	6,362	(3)	17
Available-for-sale investment securities	70,781	66,362	69,040	4,419	1,741	7	3
	139,623	128,635	129,679	10,988	9,944	9	8
Other assets	41,109	36,076	32,978	5,033	8,131	14	25
Total assets	480,827	411,220	436,653	69,607	44,174	17	10
Liabilities
Deposits and debt securities in issue
Deposits by banks	31,903	33,634	38,461	(1,731)	(6,558)	(5)	(17)
Customer accounts	279,089	230,147	251,244	48,942	27,845	21	11
Debt securities in issue	33,364	20,860	29,272	12,504	4,092	60	14
	344,356	284,641	318,977	59,715	25,379	21	8
Liabilities held at fair value
Financial liabilities held at fair value through profit or loss	18,380	16,947	14,505	1,433	3,875	8	27
Derivative financial instruments	43,425	43,109	36,584	316	6,841	1	19
	61,805	60,056	51,089	1,749	10,716	3	21
Subordinated liabilities and other borrowed funds	15,555	16,922	16,730	(1,367)	(1,175)	(8)	(7)
Other liabilities	29,058	25,711	21,937	3,347	7,121	13	32
Total liabilities	450,774	387,330	408,733	63,444	42,041	16	10
Equity	30,053	23,890	27,920	6,163	2,133	26	8
Total liabilities and shareholders' funds	480,827	411,220	436,653	69,607	44,174	17	10

Balance sheet

Unless otherwise stated, the variance and analysis explanations compare the position as at 30 June 2010 with the position as at 31 December 2009.

The Group is focused on maintaining a strong balance sheet. We remain highly liquid and continue to attract deposits. The balance sheet remains well diversified and conservative with very low exposure to problem asset classes and European sovereign debt. Our advances to deposits ratio is lower than at the year end. We remain well capitalised and continue to be disciplined in the management of growth in risk weighted assets. All maturity requirements for 2010 have been prefunded and the Group continued to see good appetite for its paper when raising senior debt funding in April and June this year.

Balance sheet footings grew by $44 billion, or 10 per cent from the year-end. Whilst we experienced currency volatility in markets such as Korea, the change between the two balance sheet dates was not significant and growth in footings on a constant currency basis was also around 10 per cent. This growth was primarily driven by the increase in customer lending on the back of significant growth in customer deposits, with more of our surplus liquidity being held with central banks. Our equity position further strengthened by $2.1 billion primarily due to profit accretion during the period and $0.5 billion capital raised through the India listing. Offsetting this were dividend payouts and movements in foreign currency translation reserve, primarily Korean Won. Around 70 per cent of the balance sheet continues to be held and managed on an amortised cost basis. Over 50 per cent of assets have a residual contractual maturity of less than a year.

Advances

Customer advances, including those held at fair value, grew by $18 billion, or 9 per cent, to $219 billion. Economies, especially in our footprint markets, have recovered well, supported by government intervention in some instances, resulting in customer demand and our risk appetite growing steadily. Consumer Banking grew their book by $8 billion to $103 billion, which constituted 47 per cent of the Group's advances. Mortgages grew across all markets by $3.5 billion, or 6 per cent, in line with the strategy to pursue secured lending. With delinquency trends and flow rates improving on the back of improved economic indicators, we have started to selectively drive growth in unsecured products. Other lending including Credit Card and Personal Loan advances are up by $3.9 billion at the end of the first half of 2010 and the SME book grew by $0.9 billion. We continue to reshape the SME book with a greater focus on secured and partly secured lending including government guaranteed schemes in some markets.

Wholesale Banking has also maintained strong momentum and focused on deepening existing client relationships with resultant growth across our major markets. As economies improved, manufacturing and infrastructure projects saw a revival leading to increased demand for funding. Lending in first half of 2010 was primarily directed towards the "Manufacturing" and "Transport, storage and communication" sectors, which grew by $6 billion and $2 billion, respectively. Correspondingly, exposures to governments reduced by $3 billion as liquidity was channelled to other sectors.

Investment securities

Investment securities, including those held at fair value, grew by $3 billion due to increased statutory requirements in some countries and on account of higher trading positions based on expected rate movements. The maturity profile of our investments continues to be largely consistent with around 55 per cent of the book having a residual maturity less than twelve months.

Derivatives

In the aftermath of the volatility seen in the foreign exchange and securities markets in 2008, customer confidence and appetite for derivative transactions reduced. With volatility reducing, confidence is slowly being restored and volumes are increasing with a resultant increase of $6 billion to $45 billion in the unrealised mark to market as at the balance sheet date. Our risk positions remain largely balanced resulting in a corresponding increase in the negative mark to market. Of the total $45 billion of unrealised market to market, $20 billion is available for offset due to master netting agreements.

Deposits

The Group continues to drive deposit gathering leveraging on its franchise and brand promise. Customer deposits including those held at fair value increased by $31 billion, or 12 per cent, with both CASA and term deposits growing as we continued to strategically drive the deposit mix. Whilst in 2009, the focus was on increasing CASA and reducing expensive term deposits, the steady interest rate environment with the expectation of an upward bias has in recent months resulted in renewed focus on longer term time deposits. Overall CASA continues to constitute over 50 per cent of total deposits including those held with banks.

Subordinated liabilities and other borrowed funds

Subordinated liabilities were reduced by $1.2 billion with redemptions being partly replaced with senior funding leveraging on the market appetite for our paper. This aligns with the move to change our capital mix by reducing over time the proportion of Tier 2 capital whilst further strengthening Tier 1 capital thereby enabling us to be better prepared to meet potential changes in regulations.

Debt securities in issue, including those held at fair value, increased by $3 billion compared to 31 December 2009 with issuance of new senior debt in the United Kingdom at competitive pricing.

Cash and balances held with Central Banks

Our continued emphasis on liquidity has resulted in our deposit growth exceeding asset growth in this period and surplus funds continue to be held with central banks as at the balance sheet date pending alternate deployment.

Equity

As of 30 June 2010, total equity was $30 billion, an increase of $2.1 billion from the year end. This is driven by profit accretion of $2.1 billion during the six months ended 30 June 2010. The increase of $0.5 billion arising from the issue of Indian Depository Receipts and the positive revaluation movement on available-for-sale investments amounting to $0.4 billion have been offset by dividend payment and movements in the foreign currency translation reserve.

Summary

During this half year, we have further strengthened the balance sheet across both businesses and geographies whilst continuing to maintain high levels of liquidity and capital.

Standard Chartered PLC - Risk review

Risk overview

Standard Chartered has a defined risk appetite, approved by the Board, which is an expression of the amount of risk we are prepared to take and plays a central role in the development of our strategic plans and policy. We also regularly conduct stress tests to ensure that we are operating within our expressed risk appetite across key markets and customer segments.

We maintain a diversified portfolio across countries, products, and customer segments. We are disciplined in our liquidity management, and we benefit from a well-established risk governance structure and an experienced senior team.

Our proactive approach to risk management, and steps taken early on in the economic crisis of 2008-09 to reshape our portfolios and tighten underwriting standards, helped to mitigate the impact of market turbulence on our performance. Through the first half of 2010, our balance sheet and liquidity position remained strong, and we are well positioned in mid-2010 to address further challenges and potential economic weakness this year and in 2011.

Our lending portfolio is diversified across a wide range of products, industries and customer segments, which serves to mitigate risk. We operate in more than 70 countries and there is no single country which accounts for more than 20 per cent of loans and advances to customers, or operating income. Our cross-border asset exposure is diversified and reflects our strategic focus on our core markets and customer segments. Approximately 45 per cent of our loans and advances to customers are of short maturity, and within Wholesale Banking approximately 65 per cent of loans and advances have a tenor of one year or less. More than 75 per cent of Consumer Banking assets are secured.

We also have low exposure to asset classes and segments outside of our core markets and target customer base. Our commercial real estate exposure accounts for less than two per cent of our total assets, and our exposure to leveraged loans and European sovereign debt is very low. Our portfolio of asset backed securities (ABS) accounts for 0.5 per cent of our total assets.

Market risk is tightly monitored using Value at Risk (VaR) methodologies complemented by sensitivity measures, gross nominal limits and management action triggers at a detailed portfolio level. This is supplemented with extensive stress testing which takes account of more extreme price movements.

Our liquidity in the first half of 2010 benefited from continued good inflows of customer deposits, which helped us to maintain a strong advances-to-deposits ratio. Liquidity will continue to be deployed to support growth opportunities in our chosen markets. We manage multi-currency liquidity in each of our geographical locations, ensuring that we can meet all short-term funding requirements and that our balance sheet remains structurally sound. We are a net provider of liquidity to the interbank money markets.

We have a well-established risk governance structure and an experienced senior team. Members of our senior leadership sit on our risk committees, which ensures that risk oversight is a critical focus for all our directors, while common membership between these committees helps us address the inter-relationships between risk types.

Since 1 January 2008, Standard Chartered has used the advanced Internal Ratings Based (IRB) approach under the Basel II regulatory framework to calculate credit risk capital. The UK's Financial Services Authority (FSA) has granted Standard Chartered CAD2 internal model approval covering the majority of interest rate and foreign exchange risk as well as precious and base metals market risk. Positions outside the CAD2 scope are assessed according to standard FSA rules.

In March 2010, the Board Audit and Risk Committee was split into a Board Risk Committee (BRC) and a Board Audit Committee (BAC), to align with the recommendations of the Walker Review. Also as of March 2010, the Group Chief Risk Officer reports to the Group Finance Director and to the BRC.

Risk performance review

In the first half of 2010, credit conditions in our footprint continued to improve. There remains some uncertainty around the pace and strength of the global economic recovery, but economies in our footprint performed well in the first half of the year and appear well-positioned for further growth in the second half of 2010.

In Consumer Banking, there was a significant improvement in loan impairment in the first half of 2010. Impairment levels peaked in the second quarter of 2009, but have steadily declined since then, primarily as a result of strengthening macroeconomic conditions in our footprint countries.

The improvement in impairment was also supported by a disciplined approach to risk management and continued investment in collections infrastructure to minimise account delinquency. In our major markets (Korea, Hong Kong, Singapore and Taiwan), which constitute over 75 per cent of the Consumer Banking portfolio, the average first half 2010 loan impairment was 21 basis points. We also saw improvements in UAE and India in the first half of 2010.

In Wholesale Banking loan impairment fell in the first half of 2010 after the increase experienced in 2008-2009. Portfolio indicators trended positively in the Wholesale Banking book in the first half of 2010, reflecting the improving credit environment in our footprint. As a consequence, the level of loan impairment in the first half of 2010 was lower than both the first and second half of 2009.

Elsewhere, the portfolio remained resilient. There were non-material levels of impairment on the ABS portfolio in the first half of 2010. The carrying value of the ABS portfolio reduced, primarily as a result of redemptions and some sales. The overall quality of the ABS book remains good with no direct US sub-prime, and minimal Alt-A, exposures. Our net exposure to ABS represents less than 1 per cent of total Group assets.

Total average VaR declined in the first half of 2010 compared to both the second half of 2009 and the first half of 2009. This decline was primarily due to lower non-trading book VaR, and reflected a decrease in the volatility of credit spreads that had increased sharply after the collapse of Lehman Brothers in September 2008.

Principal uncertainties

We are in the business of taking selected risks to generate shareholder value, and we seek to contain and mitigate these risks to ensure they remain within our risk appetite and are adequately compensated. However, risks are by their nature uncertain and the management of risk relies on judgements and predictions about the future.

The key uncertainties we face in the coming year are set out below. This should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties that we may experience.

Changing macroeconomic conditions in footprint countries

Macroeconomic conditions have an impact on personal expenditure and consumption, demand for business products and services, the debt service burden of consumers and businesses, the general availability of credit for retail and corporate borrowers and the availability of capital and liquidity funding for our business. All these factors may impact our performance.

In the first half of 2010, the world economy continued to emerge from the crisis, but the pace of recovery has been uneven. Accelerated fiscal retrenchment in Europe, combined with the risk aversion created by recent volatility in the Euro area, mean the possibility of a return to negative growth is significant. However, we operate primarily in countries that have led the global recovery in the first half of 2010, and our major markets appear well positioned to avoid another downturn.

We balance risk and return taking account of changing conditions through the economic cycle, and monitor economic trends in our markets very closely. We also continuously review the suitability of our risk policies and controls. Our risk management processes are proactive and dynamic, allowing us to respond quickly to changes in economic conditions or outlook.

Regulatory changes and compliance

Our business as an international bank is subject to a complex regulatory framework comprising legislation, regulation and codes of practice, in each of the countries in which we operate.

A key uncertainty relates to the way in which governments and regulators adjust laws and regulations and economic policies in response to macroeconomic and other systemic conditions. The financial crisis has spurred unprecedented levels of proposals to change the regulations governing financial institutions and further changes to regulations remain under consideration in many jurisdictions.

The nature and impact of future changes in laws, regulations and economic policies are not predictable and could run counter to our strategic interests. We support changes to laws, regulations or codes of practice that will improve the overall stability of the financial system. However, we also have concerns that certain proposals may not achieve this desired objective and may have unintended consequences, either individually or in terms of aggregate impact. Proposed changes could affect the volatility and liquidity of the financial markets and, consequently, the way we conduct business and manage capital and liquidity. These effects may directly or indirectly impact our financial performance.

Both unilaterally and through our participation in industry forums, we respond to consultation papers and discussions initiated by regulators and governments. We also keep a close watch on key regulatory developments in order to anticipate changes and their potential impact.

We have a commitment to maintaining strong relationships with governments and regulators in the countries in which we operate. At any time the Group may be in discussion with a range of authorities and regulatory bodies in different countries on matters that relate to its past or current business activities.

HM Treasury regulations require compliance with sanctions adopted by the UK government. Similarly, US laws and regulations require compliance with US economic sanctions against designated foreign countries, nationals and others. The Group has a US dollar payments and clearing business and has policies, procedures and controls designed to ensure compliance with relevant laws and regulations. Several US agencies have investigated how a number of other financial institutions have processed US dollar payments potentially involving sanctioned parties. In light of that activity relating to other institutions, the Group initiated discussions with US authorities to discuss its past business. These discussions are continuing and the Group is conducting a review of its historical business and related activities relevant to US sanctions compliance, predominantly with respect to Iranian business. The Group cannot predict when the review and these discussions will be completed or what the outcome will be.

On 29 February 2008, the Group completed the acquisition of American Express Bank (AEB). Prior to the acquisition, subsidiaries of AEB located in New York and Miami had entered separately into a Written Agreement with the New York State Banking Department and a Cease and Desist Order with the Federal Reserve Bank of Atlanta to address deficiencies relating to compliance with applicable federal and state laws and regulations governing anti-money laundering. All the requirements of the Cease and Desist Order have been satisfied in the first half of 2010 and we are now in full compliance.

Financial markets dislocation

Financial market volatility subsided in the second half of 2009 and in the first of half of 2010. However there remains a risk that renewed volatility or a sudden financial market dislocation could affect our performance through the second half of 2010 and in 2011. These factors may have an impact on the mark-to-market valuations of assets in our available-for-sale and trading portfolios. The potential losses incurred by certain customers holding derivative contracts during periods of financial market volatility could also lead to an increase in customer disputes and corporate defaults.

At the same time, financial market instability could cause some financial institution counterparties to experience tighter liquidity conditions or even fail. Government action has reduced the systemic risk, but the impact on the financial services industry of ongoing uncertainty in the broader economic environment means that the risk nonetheless remains.

We have low exposure to risky asset classes and segments. We also maintain robust appropriateness and suitability processes to mitigate the risk of customer disputes. We closely monitor the performance of our financial institution counterparties and adjust our exposure to these counterparties as necessary.

Principal uncertainties continued

Geopolitical events

We operate in a large number of markets around the world, and our performance is in part reliant on the openness of cross-border trade and capital flows. We face a risk that geopolitical tensions or conflict in our footprint could impact trade flows, our customers' ability to pay, and our ability to manage capital or operations across borders.

We actively monitor the political situation in all our principal markets, and conduct stress tests of the impact of extreme but plausible geopolitical events on our performance and the potential for such events to jeopardise our ability to operate within our stated risk appetite.

Reduced access to funding

Liquidity risk is the risk that we either do not have sufficient liquid financial resources available to meet all our obligations as they fall due, or can only access these financial resources at excessive cost. Exceptional market events can impact us adversely, thereby affecting our ability to fulfil our obligations as they fall due. The principal uncertainties for liquidity risk are that customers withdraw their deposits at a substantially faster rate than expected, or that asset repayments are not received on the intended maturity date.

We seek to manage our liquidity prudently in all geographical locations and for all currencies. Our customer deposit base is diversified both by type and maturity, and we have a low dependence on wholesale funding. We also hold a portfolio of liquid assets that can be realised if a liquidity stress event occurs.

Exchange rate movements

Changes in exchange rates affect, among other things, the value of our assets and liabilities denominated in foreign currencies, as well as the earnings reported by our non-US dollar denominated branches and subsidiaries. A sharp fall in the value of the US dollar could also impact trade flows and the wealth of clients holding US dollar-denominated assets, both of which could have an impact on our performance.

We monitor exchange rate movements closely and adjust our exposures accordingly. Under certain circumstances, we may take the decision to hedge our foreign exchange exposures in order to protect our capital ratios from the effects of changes in exchange rates. The effect of exchange rate movements on the capital adequacy ratio is mitigated by corresponding movements in risk weighted assets. The table below sets out the period end and average currency exchange rates per US dollar for India, Korea and Singapore for the first half of 2010, and the half-year periods ending 30 June 2009 and 31 December 2009.

	6 months ended 30.06.10	6 months ended 30.06.09	6 months ended 31.12.09
Indian rupee
Average	45.79	49.22	47.50
Period end	46.39	47.89	46.54
Korean won
Average	1,155.30	1,352.04	1,202.42
Period end	1,222.16	1,274.09	1,164.47
SSingapore dollar
Average	1.40	1.49	1.41
Period end	1.40	1.45	1.40

As a result of our normal business operations, Standard Chartered is exposed to a broader range of risks than those principal uncertainties mentioned previously, and our approach to managing risk is detailed on the following pages.

Risk management

The management of risk lies at the heart of Standard Chartered's business. One of the main risks we incur arises from extending credit to customers through our trading and lending operations. Beyond credit risk, we are also exposed to a range of other risk types such as country cross-border, market, liquidity, operational, pension, reputational and other risks which are inherent to our strategy, product range and geographical coverage.

Risk management framework

Effective risk management is fundamental to being able to generate profits consistently and sustainably and is thus a central part of the financial and operational management of the Group.

Through our risk management framework we manage enterprise-wide risks, with the objective of maximising risk-adjusted returns while remaining within our risk appetite.

As part of this framework, we use a set of principles that describe the risk management culture we wish to sustain:

• balancing risk and return: risk is taken in support of the requirements of our stakeholders, in line with our strategy and within our risk appetite

• responsibility: it is the responsibility of all employees to ensure that risk-taking is disciplined and focused. We take account of our social responsibilities and our commitments to customers in taking risk to produce a return

• accountability: risk is taken only within agreed authorities and where there is appropriate infrastructure and resource. All risk-taking must be transparent, controlled and reported

• anticipation: We seek to anticipate future risks and ensure awareness of all known risks

• competitive advantage: We seek to achieve competitive advantage through efficient and effective risk management and control.

Risk governance

Ultimate responsibility for setting our risk appetite and for the effective management of risk rests with the Board.

Acting within an authority delegated by the Board, the Board Risk Committee (BRC), whose membership is comprised exclusively of non-executive directors of the Group, has responsibility for oversight and review of prudential risks including credit, market, capital and liquidity and operational. It reviews the Group's overall risk appetite and makes recommendations thereon to the Board. Its responsibilities also include reviewing the appropriateness and effectiveness of the Group's risk management systems and controls, considering the implications of material regulatory change proposals, ensuring effective due diligence on material acquisitions and disposals, and monitoring the activities of the GRC and GALCO.

The BRC receives regular reports on risk management, including our portfolio trends, policies and standards, stress testing, liquidity and capital adequacy, and is authorised to

Risk management continued

investigate or seek any information relating to an activity within its terms of reference.

Executive responsibility for risk management is held by the Standard Chartered Bank Court (the Court) which comprises the executive directors and other directors of Standard Chartered Bank.

The Court delegates authority for the management of risk to several committees.

The Group Risk Committee (GRC) is responsible for the management of all risks other than those delegated by the Court to the Group Asset and Liability Committee (GALCO) and the Group Pensions Executive Committee (PEC). The GRC is responsible for the establishment of, and compliance with, policies relating to credit risk, country cross-border risk, market risk, operational risk, and reputational risk. The GRC also defines our overall risk management framework.

The GALCO is responsible for the management of capital ratios and the establishment of, and compliance with, policies relating to balance sheet management, including management of our liquidity, capital adequacy and structural foreign exchange rate risk.

The Group PEC is responsible for the management of pension risk.

Members of the Court are also members of both the GRC and GALCO. The GRC is chaired by the Group Chief Risk Officer (GCRO). The GALCO is chaired by the Group Finance Director.

Risk limits and risk exposure approval authority frameworks are set by the GRC in respect of credit risk, country cross-border risk and market risk. The GALCO sets the approval authority framework in respect of liquidity risk. Risk approval authorities may be exercised by risk committees or authorised individuals.

The committee governance structure ensures that risk-taking authority and risk management policies are cascaded down from the Board through to the appropriate functional, divisional and country-level committees. Information regarding material risk issues and compliance with policies and standards is communicated to the country, business, functional committees and Group-level committees.

Business, function and governance heads are accountable for risk management in their businesses and functions, and for countries where they have governance responsibilities. This includes:

• implementing across all business activities the policies and standards as agreed by the Group-level risk committees

• managing risk in line with appetite levels agreed by the Group-level risk committees

• developing and maintaining appropriate risk management infrastructure and systems to facilitate compliance with risk policies.

The GCRO directly manages a Risk function which is separate from the origination, trading and sales functions of the businesses. The GCRO also chairs the GRC and is a member of the Group Management Committee. Chief risk officers for both Wholesale and Consumer Banking have their primary reporting lines into the GCRO. Country chief risk officers take overall responsibility for risk within our principal countries.

The Risk function is responsible for upholding the integrity of our risk/return decisions, and in particular for ensuring that risks are properly assessed, that risk/return decisions are made transparently on the basis of this proper assessment, and are controlled in accordance with our standards.

The Risk function is independent of the origination and sales functions to ensure that the necessary balance in risk/return decisions is not compromised by short-term pressures to generate revenues.

The Risk function is also responsible for maintaining the Group's Risk Management Framework (RMF), ensuring it remains appropriate to the Group's activities, and is effectively communicated and implemented across the Group. The Risk function also administers our risk-related governance and reporting processes.

Our RMF identifies the risk types to which we are exposed, each of which is controlled by a designated risk control owner (RCO). The major risk types are described individually in the following sections. The RCOs have responsibility for establishing minimum standards and for implementing governance and assurance processes. The RCOs report up through specialist risk committees to the GRC, the GALCO, and the PEC.

Group Internal Audit (GIA) is a separate Group function that reports to the chairman of the Board Audit Committee (BAC) and to the Group Chief Executive Officer. Its role is to provide independent assurance to the BAC and senior management that risks associated with the Group's business have been identified and appropriately designed controls have been put in place to cover risks, and to ensure that these controls are operating as intended.

Risk appetite

We manage our risks to build a sustainable franchise in the interests of all our stakeholders.

Risk appetite is an expression of the amount of risk we are willing to take in pursuit of our strategic objectives, reflecting our capacity to sustain losses and continue to meet our obligations arising from a range of different stress trading conditions.

We define our risk appetite in terms of both volatility of earnings and the maintenance of minimum regulatory capital requirements under stress scenarios. We also define a risk appetite with respect to liquidity risk and reputational risk.

Our quantitative risk profile is assessed through a bottom-up analytical approach covering all of our major businesses, countries and products. The risk appetite is approved by the Board and forms the basis for establishing the risk parameters within which the businesses must operate, including policies, concentration limits and business mix.

The GRC is responsible for ensuring that our risk profile is managed in compliance with the risk appetite set by the Board.

Stress testing

Stress testing and scenario analysis are used to assess the financial and management capability of Standard Chartered to continue operating effectively under extreme but plausible trading conditions. Such conditions may arise from economic, legal, political, environmental and social factors.

Stress testing continued

Our stress testing framework is designed to:

• contribute to the setting and monitoring of risk appetite

• identify key risks to our strategy, financial position, and reputation

• examine the nature and dynamics of the risk profile and assess the impact of stresses on our profitability and business plans

• ensure effective governance, processes and systems are in place to co-ordinate and integrate stress testing

• inform senior management

• ensure adherence to regulatory requirements.

A stress testing forum, led by the Risk function with participation from the businesses, Group Finance, Global Research and Group Treasury, aims to ensure that the earnings and capital implications of specific stress scenarios are fully understood. The stress testing forum generates and considers pertinent and plausible scenarios that have the potential to adversely affect our business.

Our stress testing activity in the first half of 2010 focused on specific asset classes, customer segments and the potential impact of macroeconomic factors. Stress tests have taken into consideration possible future scenarios that could arise as a result of the development of prevailing market conditions.

Stress testing themes such as inflation, US dollar depreciation, declines in asset values or potential border conflicts are co-ordinated by the stress testing forum to ensure consistency of impacts on different risk types or countries. Stress tests for country or risk type are also performed. Examples of risk type stress testing are covered in the section on Market risk.

Credit risk

Credit risk is the potential for loss due to the failure of a counterparty to meet its obligations to pay the Group in accordance with agreed terms. Credit exposures may arise from both the banking and trading books.

Credit risk is managed through a framework that sets out policies and procedures covering the measurement and management of credit risk. There is a clear segregation of duties between transaction originators in the businesses and approvers in the Risk function. All credit exposure limits are approved within a defined credit approval authority framework.

Credit policies

Group-wide credit policies and standards are considered and approved by the GRC, which also oversees the delegation of credit approval and loan impairment provisioning authorities.

Policies and procedures specific to each business are established by authorised risk committees within Wholesale and Consumer Banking. These are consistent with our Group-wide credit policies, but are more detailed and adapted to reflect the different risk environments and portfolio characteristics.

Credit rating and measurement

Risk measurement plays a central role, along with judgement and experience, in informing risk taking and portfolio management decisions. It is a primary area for sustained investment and senior management attention.

For IRB portfolios, a standard alphanumeric credit risk grade (CG) system is used in both Wholesale and Consumer Banking. The grading is based on our internal estimate of probability of default over a one year horizon, with customers or portfolios assessed against a range of quantitative and qualitative factors. The numeric grades run from 1 to 14 and some of the grades are further sub-classified A, B or C. Lower credit grades are indicative of a lower likelihood of default. Credit grades 1A to 12C are assigned to performing customers or accounts, while credit grades 13 and 14 are assigned to non-performing or defaulted customers.

Our credit grades in Wholesale Banking are not intended to replicate external credit grades, and ratings assigned by external ratings agencies are not used in determining our internal credit grades. Nonetheless, as the factors used to grade a borrower may be similar, a borrower rated poorly by an external rating agency is typically assigned a worse internal credit grade.

Advanced IRB models cover a substantial majority of our exposures and are used extensively in assessing risks at customer and portfolio level, setting strategy and optimising our risk-return decisions.

IRB risk measurement models are approved by the responsible risk committee, on the recommendation of the Group Model Assessment Committee (MAC). The MAC supports risk committees in ensuring risk identification and measurement capabilities are objective and consistent, so that risk control and risk origination decisions are properly informed. Prior to review by the MAC, all IRB models are validated in detail by a model validation team, which is separate from the teams which develop and maintain the models. Models undergo a detailed annual review. Such reviews are also triggered if the performance of a model deteriorates materially against predetermined thresholds during the ongoing model performance monitoring process.

Credit approval

Major credit exposures to individual counterparties, groups of connected counterparties and portfolios of retail exposures are reviewed and approved by the Group Credit Committee (GCC). The GCC derives its authority from the GRC.

All other credit approval authorities are delegated by the GRC to individuals based both on their judgement and experience and a risk-adjusted scale which takes account of the estimated maximum potential loss from a given customer or portfolio. Credit origination and approval roles are segregated in all but a very few authorised cases. In those very few exceptions where they are not, originators can only approve limited exposures within defined risk parameters.

Concentration risk

Credit concentration risk is managed within concentration caps set by counterparty or groups of connected counterparties, by country in Wholesale Banking; and by product and country in Consumer Banking. Additional targets are set and monitored for concentrations by credit rating.

Credit concentrations are monitored by the responsible risk committees in each of the businesses and concentration limits that are material to the Group are reviewed and approved at least annually by the GCC.

Credit risk continued

Credit monitoring

We regularly monitor credit exposures, portfolio performance, and external trends which may impact risk management outcomes.

Internal risk management reports are presented to risk committees, containing information on key environmental, political and economic trends across major portfolios and countries; portfolio delinquency and loan impairment performance; as well as IRB portfolio metrics including credit grade migration.

The Wholesale Banking Credit Issues Forum (WBCIF) is a sub-committee of the Wholesale Banking Risk Committee, which in turn is a sub-committee of and derives it authority from the GRC. The WBCIF meets regularly to assess the impact of external events and trends on the Wholesale Banking credit risk portfolio and to define and implement our response in terms of appropriate changes to portfolio shape, portfolio and underwriting standards, risk policy and procedures.

Corporate accounts or portfolios are placed on Early Alert when they display signs of weakness or financial deterioration, for example, where there is a decline in the customer's position within the industry, a breach of covenants, non-performance of an obligation, or there are issues relating to ownership or management.

Such accounts and portfolios are subjected to a dedicated process overseen by Early Alert Committees in each country. Account plans are re-evaluated and remedial actions are agreed and monitored. Remedial actions include, but are not limited to, exposure reduction, security enhancement, exiting the account or immediate movement of the account into the control of Group Special Assets Management (GSAM), our specialist recovery unit.

In Consumer Banking, portfolio delinquency trends are monitored continuously at a detailed level. Individual customer behaviour is also tracked and informs lending decisions. Accounts which are past due are subject to a collections process, managed independently by the Risk function. Charged-off accounts are managed by specialist recovery teams. In some countries, aspects of collections and recovery functions are outsourced.

The SME business is managed within Consumer Banking in two distinct segments: small businesses and medium enterprises, differentiated by the annual turnover of the counterparty. Medium enterprise accounts are monitored in line with Wholesale Banking procedures, while small business accounts are monitored in line with other Consumer Banking accounts. Medium enterprise and private banking past due accounts are managed by GSAM.

Credit mitigation

Potential credit losses from any given account, customer or portfolio are mitigated using a range of tools such as collateral, netting agreements, credit insurance, credit derivatives and other guarantees. The reliance that can be placed on these mitigants is carefully assessed in light of issues such as legal certainty and enforceability, market valuation correlation and counterparty risk of the guarantor.

Risk mitigation policies determine the eligibility of collateral types. Collateral types which are eligible for risk mitigation include: cash; residential, commercial and industrial property; fixed assets such as motor vehicles, aircraft, plant and machinery; marketable securities; commodities; bank guarantees; and letters of credit. Standard Chartered also enters into collateralised reverse repurchase agreements.

Collateral is valued in accordance with our risk mitigation policy, which prescribes the frequency of valuation for different collateral types, based on the level of price volatility of each type of collateral and the nature of the underlying product or risk exposure. Collateral held against impaired loans is maintained at fair value.

Where appropriate, credit derivatives are used to reduce credit risks in the portfolio. Due to their potential impact on income volatility, such derivatives are used in a controlled manner with reference to their expected volatility.

Traded products

Credit risk from traded products is managed within the overall credit risk appetite for corporates and financial institutions.

The credit risk exposure from traded products is derived from the positive mark-to-market value of the underlying instruments, and an additional component to cater for potential market movements.

For derivative contracts, we limit our exposure to credit losses in the event of default by entering into master netting agreements with certain counterparties. As required by IAS 32, exposures are not presented net in the financial statements.

In addition, we enter into Credit Support Annexes (CSA) with counterparties where collateral is deemed a necessary or desirable mitigant to the exposure. Under a variation margin process, additional collateral is called from the counterparty if total uncollateralised mark-to-market exposure exceeds the threshold and minimum transfer amount specified in the CSA. With certain counterparties, the CSA is bilateral and requires us to post collateral if the overall mark-to-market value of positions is in the counterparty's favour and exceeds an agreed threshold.

Securities

Within Wholesale Banking, the Underwriting Committee approves the portfolio limits and parameters by business unit for the underwriting and purchase of all pre-defined securities assets to be held for sale. The Underwriting Committee is established under the authority of the GRC. Wholesale Banking operates within set limits, which include country, single issuer, holding period and credit grade limits.

Day to day credit risk management activities for traded securities are carried out by Traded Credit Risk Management whose activities include oversight and approval of temporary excesses within the levels delegated by the Underwriting Committee. Issuer credit risk, including settlement and pre-settlement risk, is controlled by Wholesale Banking Risk, while price risk is controlled by Group Market Risk.

The Underwriting Committee approves individual proposals to underwrite new corporate security issues. Where an underwritten security is held for a period longer than the target sell-down period, the final decision on whether to sell the position rests with the Risk function.

Loan portfolio

Loans and advances to customers have grown by $34.4 billion since 30 June 2009 and $17.6 billion since 31 December 2009 to $219 billion.

As of 30 June 2010, the Consumer Banking portfolio had grown by $18.4 billion or 22 per cent since 30 June 2009 and by $8.3 billion or 9 per cent since 31 December 2009. The growth was largely in the residential mortgages, SME and Private Banking portfolios. The increase in the first six months of 2010 in the Americas, UK and Europe portfolio is almost entirely due to growth in the offshore portfolio for Private Banking clients in our footprint markets.

Growth in the Wholesale Banking customer portfolio was $16.0 billion, or 16 per cent, since 30 June 2009, and $9.1 billion, or 8 per cent, since 31 December 2009. Most of the growth since December 2009 has been in Singapore and Hong Kong, primarily driven by growth in trade loans and the acquisition of new clients. In addition, over the same period there was 17 per cent growth in Americas, UK and Europe, as a result of credit facilities extended to customers to support the business they do elsewhere in the Group's network, and the booking of capital markets syndications and corporate finance transactions originated in our footprint.

Exposures to banks reduced by 5 per cent in June 2010 compared to December 2009, as a portion of our surplus liquidity was redeployed to Government and supranational counterparties. Despite this, we continued to be a net provider of liquidity to the interbank money markets.

The Wholesale Banking portfolio remains well diversified across both geography and industry, with no significant counterparty concentrations within the industry classifications of Manufacturing; Commerce; or Financing, insurance and business services.

Single borrower concentration risk continues to be mitigated by active distribution of assets to banks and institutional investors, some of which is achieved through credit-default swaps and synthetic risk transfer structures.

	30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Loans to individuals
Mortgages	16,831	9,111	18,855	12,731	1,925	1,241	188	213	61,095
Other	3,377	5,417	6,487	5,314	1,045	2,384	664	2,898	27,586
Small and medium enterprises	1,863	2,325	4,085	3,871	1,351	600	116	2	14,213
Consumer Banking	22,071	16,853	29,427	21,916	4,321	4,225	968	3,113	102,894
Agriculture, forestry and fishing	74	110	37	647	109	76	748	555	2,356
Construction	194	60	221	440	432	694	47	229	2,317
Commerce	3,524	5,455	723	4,002	415	4,822	654	4,029	23,624
Electricity, gas and water	562	335	88	685	-	276	149	1,406	3,501
Financing, insurance and business services	2,894	3,749	585	3,991	812	3,478	183	6,248	21,940
Governments	-	1,243	-	60	2	287	9	776	2,377
Mining and quarrying	60	569	-	392	76	285	204	6,104	7,690
Manufacturing	4,046	1,698	3,581	9,134	2,656	2,378	769	7,727	31,989
Commercial real estate	2,064	2,524	1,023	845	513	847	5	454	8,275
Transport, storage and communication	739	2,127	344	878	891	1,177	218	5,093	11,467
Other	121	338	224	345	5	138	62	473	1,706
Wholesale Banking	14,278	18,208	6,826	21,419	5,911	14,458	3,048	33,094	117,242
Portfolio impairment provision	(55)	(45)	(106)	(191)	(61)	(245)	(36)	(42)	(781)
Total loans and advances to customers	36,294	35,016	36,147	43,144	10,171	18,438	3,980	36,165	219,355
Total loans and advances to banks	12,838	8,554	2,675	8,573	590	1,763	467	14,941	50,401
Loans and advances to customers - average	32,595	35,053	37,903	44,298	9,372	18,498	3,902	33,228	214,849

Total loans and advances to customers include $4,350 million held at fair value through profit or loss. Total loans and advances to banks include $1,011 million held at fair value through profit or loss.

Loan portfolio continued

	30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Loans to individuals
Mortgages	13,496	6,687	17,629	9,837	1,538	994	205	145	50,531
Other	2,785	4,886	4,419	4,785	829	2,469	597	831	21,601
Small and medium enterprises	1,333	2,036	3,564	2,651	1,159	671	121	806	12,341
Consumer Banking	17,614	13,609	25,612	17,273	3,526	4,134	923	1,782	84,473
Agriculture, forestry and fishing	20	72	32	305	71	83	498	600	1,681
Construction	243	119	295	385	335	728	108	219	2,432
Commerce	2,557	3,738	692	3,040	787	4,721	703	2,258	18,496
Electricity, gas and water	444	14	52	538	34	253	66	1,373	2,774
Financing, insurance and business services	3,349	2,622	328	3,569	453	2,834	299	9,739	23,193
Governments	-	1,165	331	3,305	-	941	12	426	6,180
Mining and quarrying	-	402	12	254	123	309	279	5,095	6,474
Manufacturing	2,616	1,177	2,914	7,256	2,429	1,914	657	5,505	24,468
Commercial real estate	1,473	2,226	781	889	324	680	6	426	6,805
Transport, storage and communication	594	725	381	835	208	1,376	218	2,704	7,041
Other	357	467	198	281	5	290	17	70	1,685
Wholesale Banking	11,653	12,727	6,016	20,657	4,769	14,129	2,863	28,415	101,229
Portfolio impairment provision	(64)	(42)	(123)	(199)	(78)	(150)	(43)	(51)	(750)
Total loans and advances to customers	29,203	26,294	31,505	37,731	8,217	18,113	3,743	30,146	184,952
Total loans and advances to banks	18,288	7,115	2,665	5,830	323	1,774	637	9,644	46,276
Loans and advances to customers - average	28,113	23,538	30,809	37,285	8,285	17,561	3,380	26,699	175,670

Total loans and advances to customers include $2,204 million held at fair value through profit or loss. Total loans and advances to banks include $910 million held at fair value through profit or loss.

	31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Loans to individuals
Mortgages	14,816	8,149	20,460	11,016	1,685	1,128	212	171	57,637
Other	2,971	4,957	4,951	5,012	772	2,396	678	1,909	23,646
Small and medium enterprises	1,641	2,370	4,024	3,258	1,255	636	113	3	13,300
Consumer Banking	19,428	15,476	29,435	19,286	3,712	4,160	1,003	2,083	94,583
Agriculture, forestry and fishing	16	81	25	351	75	150	613	630	1,941
Construction	274	49	370	350	342	788	116	234	2,523
Commerce	2,508	4,819	939	3,612	861	4,959	765	4,576	23,039
Electricity, gas and water	538	53	188	523	31	371	239	1,395	3,338
Financing, insurance and business services	2,319	4,150	668	4,515	543	4,036	174	5,406	21,811
Governments	-	966	344	3,256	1	250	34	366	5,217
Mining and quarrying	120	569	3	280	139	185	172	4,941	6,409
Manufacturing	2,586	1,061	3,369	7,794	2,485	1,857	685	5,735	25,572
Commercial real estate	1,274	2,275	997	908	360	672	4	518	7,008
Transport, storage and communication	579	1,438	310	1,024	399	1,115	258	4,323	9,446
Other	397	507	268	296	6	234	21	61	1,790
Wholesale Banking	10,611	15,968	7,481	22,909	5,242	14,617	3,081	28,185	108,094
Portfolio impairment provision	(66)	(45)	(112)	(203)	(88)	(293)	(55)	(12)	(874)
Total loans and advances to customers	29,973	31,399	36,804	41,992	8,866	18,484	4,029	30,256	201,803
Total loans and advances to banks	19,453	5,085	2,780	7,232	511	1,864	300	15,708	52,933
Loans and advances to customers - average	30,257	28,299	33,910	40,631	8,416	20,360	3,253	35,897	201,023

Total loans and advances to customers include $3,511 million held at fair value through profit or loss. Total loans and advances to banks include $2,048 million held at fair value through profit or loss.

Maturity analysis

Approximately 46 per cent of our loans and advances to customers are short-term having a contractual maturity of one year or less. The Wholesale Banking portfolio remains predominantly short-term, with 65 per cent of loans and advances having a contractual maturity of one year or less. In Consumer Banking, 59 per cent of the portfolio is in the mortgage book, which is traditionally longer term in nature and well secured. Whilst the Other and SME loans in Consumer Banking have short contractual maturities, typically they may be renewed and repaid over longer terms in the normal course of business.

The following tables show the contractual maturity of loans and advances to customers by each principal category of borrowers' business or industry.

	30.06.10
	One year or less	One to five years	Over five years	Total
	$million	$million	$million	$million
Loans to individuals
Mortgages	2,587	8,287	50,221	61,095
Other	14,550	9,095	3,941	27,586
Small and medium enterprises	7,264	3,272	3,677	14,213
Consumer Banking	24,401	20,654	57,839	102,894
Agriculture, forestry and fishing	1,900	298	158	2,356
Construction	1,665	590	62	2,317
Commerce	20,182	2,590	852	23,624
Electricity, gas and water	1,079	987	1,435	3,501
Financing, insurance and business services	14,272	7,570	98	21,940
Governments	2,070	236	71	2,377
Mining and quarrying	3,008	2,739	1,943	7,690
Manufacturing	22,244	8,192	1,553	31,989
Commercial real estate	3,515	4,504	256	8,275
Transport, storage and communication	4,714	4,981	1,772	11,467
Other	1,227	341	138	1,706
Wholesale Banking	75,876	33,028	8,338	117,242
Total loans to customers	100,277	53,682	66,177	220,136
Portfolio impairment provision				(781)
				219,355

	30.06.09
	One year or less	One to five years	Over five years	Total
	$million	$million	$million	$million
Loans to individuals
Mortgages	2,339	7,403	40,789	50,531
Other	12,448	6,915	2,238	21,601
Small and medium enterprises	7,193	2,629	2,519	12,341
Consumer Banking	21,980	16,947	45,546	84,473
Agriculture, forestry and fishing	1,194	353	134	1,681
Construction	1,707	602	123	2,432
Commerce	15,988	2,342	166	18,496
Electricity, gas and water	1,003	651	1,120	2,774
Financing, insurance and business services	16,933	6,027	233	23,193
Governments	5,756	273	151	6,180
Mining and quarrying	3,430	1,724	1,320	6,474
Manufacturing	18,233	5,119	1,116	24,468
Commercial real estate	2,583	3,746	476	6,805
Transport, storage and communication	2,908	2,605	1,528	7,041
Other	1,001	629	55	1,685
Wholesale Banking	70,736	24,071	6,422	101,229
Total loans to customers	92,716	41,018	51,968	185,702
Portfolio impairment provision				(750)
				184,952

Maturity analysis continued

	31.12.09
	One year or less	One to five years	Over five years	Total
	$million	$million	$million	$million
Loans to individuals
Mortgages	2,455	7,818	47,364	57,637
Other	14,266	7,158	2,222	23,646
Small and medium enterprises	7,110	3,054	3,136	13,300
Consumer Banking	23,831	18,030	52,722	94,583
Agriculture, forestry and fishing	1,515	348	78	1,941
Construction	1,921	482	120	2,523
Commerce	19,981	2,919	139	23,039
Electricity, gas and water	1,056	825	1,457	3,338
Financing, insurance and business services	15,282	6,484	45	21,811
Governments	4,754	398	65	5,217
Mining and quarrying	3,296	1,531	1,582	6,409
Manufacturing	18,979	5,286	1,307	25,572
Commercial real estate	3,325	3,523	160	7,008
Transport, storage and communication	3,665	4,312	1,469	9,446
Other	1,369	268	153	1,790
Wholesale Banking	75,143	26,376	6,575	108,094
Total loans to customers	98,974	44,406	59,297	202,677
Portfolio impairment provision				(874)
				201,803

Analysis of the loan portfolio

The table below sets out an analysis of the loan portfolio between those loans that are neither past due nor impaired, those that are past due but not individually impaired and those that are individually impaired.

Loans neither past due nor impaired are analysed by internal credit gradings, which are based on a probability of default measure as discussed on page 25. The bandings reflect management's segmentation of the risk grades.

Loans past due but not individually impaired are analysed by the number of days that contractual payments are past due. A loan is considered past due when the counterparty has failed to make a principal or interest payment when contractually due. Past due does not necessarily mean that a loan is impaired.

Individual impairment provisions are generally raised at 90 days past due, with the exception of mortgages within Consumer Banking, where individual impairment provisions are raised after 150 days past due. Individual impaired loans for Consumer Banking will therefore not equate to those reported as non-performing on page 34.

As described on page 33, prior to the raising of an individual impairment provision, impairment on these loans is captured through the portfolio impairment provision.

Collateral held against past due and impaired loans in Consumer Banking and Wholesale Banking largely comprises residential and commercial property and property and securities respectively. Where the fair value of collateral held exceeds the outstanding loan, any excess is paid back to customers in the event of its realisation and is not available for offset against other loans.

In the Wholesale Banking corporate portfolio, the negative credit grade migration observed during 2009 largely subsided in the first half of 2010, in line with improving macroeconomic conditions across our footprint. This is also reflected in a sustained reduction in the number of accounts on Early Alert since June 2009.

During the period, Consumer Banking portfolio quality indicators have improved across all of our major markets and products. The proportion of loans in CG 12 has also reduced in the last half year as a result of improving economic conditions in our footprint markets.

Analysis of the loan portfolio continued

	30.06.10				30.06.09
	Loans to banks	Loans to customers - Wholesale Banking	Loans to customers - Consumer Banking	Total loans to customers	Loans to banks	Loans to customers - Wholesale Banking	Loans to customers - Consumer Banking	Total loans to customers
	$million	$million	$million	$million	$million	$million	$million	$million
Neither past due nor individually impaired loans
- Grades 1-5	42,725	44,972	47,631	92,603	41,382	44,986	37,524	82,510
- Grades 6-8	6,342	46,812	29,679	76,491	3,945	35,876	20,163	56,039
- Grades 9-11	1,145	21,607	19,524	41,131	786	17,262	21,132	38,394
- Grade 12	18	1,404	1,932	3,336	61	970	1,533	2,503
	50,230	114,795	98,766	213,561	46,174	99,094	80,352	179,446

Past due but not individually impaired loans
- Up to 30 days past due	18	571	2,749	3,320	25	375	2,458	2,833
- 31 - 60 days past due	-	231	401	632	-	85	445	530
- 61 - 90 days past due	-	123	303	426	-	468	278	746
- 91 - 150 days past due	-	-	188	188	-	-	309	309
	18	925	3,641	4,566	25	928	3,490	4,418

Individually impaired loans	289	2,822	997	3,819	98	2,437	1,244	3,681
Individually impairment provisions	(134)	(1,300)	(510)	(1,810)	(16)	(1,230)	(613)	(1,843)
Net individually impaired loans	155	1,522	487	2,009	82	1,207	631	1,838

Total loans and advances	50,403	117,242	102,894	220,136	46,281	101,229	84,473	185,702
Portfolio impairment provision	(2)	(313)	(468)	(781)	(5)	(250)	(500)	(750)
	50,401	116,929	102,426	219,355	46,276	100,979	83,973	184,952

Of which, held at fair value through profit or loss:
Neither past due nor individually impaired
Grades 1-5	569	3,005	-	3,005	335	917	-	917
Grades 6-8	442	744	-	744	575	708	-	708
Grades 9-11	-	601	-	601	-	579	-	579
	1,011	4,350	-	4,350	910	2,204	-	2,204

Estimated fair value of collateral:
Held against past due loans	-	175	2,231	2,406	-	130	2,025	2,155
Held against individually impaired loans	-	353	543	896	-	416	565	981

Non-performing loans:
- past due more than 90 days	-	-	188	188	-	-	309	309
- individually impaired loans	289	2,822	997	3,819	98	2,437	1,244	3,681
	289	2,822	1,185	4,007	98	2,437	1,553	3,990

Analysis of the loan portfolio continued

	31.12.09
	Loans to banks	Loans to customers - Wholesale Banking	Loans to customers - Consumer Banking	Total loans to customers
	$million	$million	$million	$million
Neither past due nor individually impaired loans
- Grades 1-5	46,534	43,811	44,158	87,969
- Grades 6-8	5,485	38,375	21,570	59,945
- Grades 9-11	730	22,177	22,728	44,905
- Grade 12	30	2,034	2,246	4,280
	52,779	106,397	90,702	197,099

Past due but not individually impaired loans
- Up to 30 days past due	2	369	2,522	2,891
- 31 - 60 days past due	-	98	406	504
- 61 - 90 days past due	-	71	239	310
- 91 - 150 days past due	-	-	222	222
	2	538	3,389	3,927

Individually impaired loans	286	2,474	1,030	3,504
Individually impairment provisions	(132)	(1,315)	(538)	(1,853)
Net individually impaired loans	154	1,159	492	1,651

Total loans and advances	52,935	108,094	94,583	202,677
Portfolio impairment provision	(2)	(355)	(519)	(874)
	52,933	107,739	94,064	201,803

Of which, held at fair value through profit or loss:
Neither past due nor individually impaired
Grades 1-5	1,192	2,092	-	2,092
Grades 6-8	855	870	-	870
Grades 9-11	1	549	-	549
	2,048	3,511	-	3,511

Estimated fair value of collateral:
Held against past due loans	-	458	1,980	2,438
Held against individually impaired loans	-	557	601	1,158

Non-performing loans:
- past due more than 90 days	-	-	222	222
- individually impaired loans	286	2,474	1,030	3,504
	286	2,474	1,252	3,726

Details of loan loss provisions and individually impaired loans are disclosed in notes 15 and 16.

Problem credit management and provisioning

Consumer Banking

In Consumer Banking, where there are large numbers of small value loans, a primary indicator of potential impairment is delinquency. However, not all delinquent loans (particularly those in the early stage of delinquency) will be impaired. Within Consumer Banking an account is considered to be delinquent when payment is not received on the due date. For delinquency reporting purposes we follow industry standards, measuring delinquency as of 1, 30, 60, 90, 120 and 150 days past due. Accounts that are overdue by more than 30 days are more closely monitored and subject to specific collections processes.

Provisioning within Consumer Banking reflects the fact that the product portfolios (excluding medium enterprises among SME customers and private banking customers) consist of a large number of comparatively small exposures. As a result, much of the provisioning is done at an account level for each product and a portfolio impairment provision (PIP) is raised on a portfolio basis. PIP is set using expected loss rates, based on past experience supplemented by an assessment of specific factors affecting the relevant portfolio. These include an assessment of the impact of economic conditions, regulatory changes and portfolio characteristics such as delinquency trends and early alert trends. The PIP methodology provides for accounts for which an individual impairment provision has not been raised.

For the main unsecured products and loans secured by automobiles, the entire outstanding amount is generally written off at 150 days past due. Unsecured consumer finance loans are similarly written off at 90 days past due. For secured loans (other than those secured by automobiles) individual impairment provisions (IIP) are generally raised at either 150 days (mortgages) or 90 days (other) past due.

The provisions are based on the estimated present values of future cashflows, in particular those resulting from the realisation of security. Following such realisation any remaining loan will be written off. The days past due used to trigger write offs and IIP are broadly driven by past experience, which shows that once an account reaches the relevant number of days past due, the probability of recovery (other than by realising security where appropriate) is low. For all products there are certain situations where the individual impairment provisioning or write off process is accelerated, such as in cases involving bankruptcy, fraud and death. Write off and IIP is accelerated for all restructured accounts to 90 days past due (unsecured and automobile finance) and 120 days past due (secured) respectively.

The procedures for managing problem credits for the Private Bank and the medium enterprises in the SME segment of Consumer Banking are similar to those adopted in Wholesale Banking (described on page 36).

Non-performing loans are defined as loans past due by more than 90 days or that are otherwise individually impaired. Consumer Banking has seen significant improvements in the level of non-performing loans in the first half of 2010, particularly in Taiwan, Korea, and Hong Kong due to strengthening macroeconomic conditions in those markets, as well as de-risking actions taken and intensified collections activities.

The cover ratio is a common metric used in considering trends in provisioning and non-performing loans. It should be noted, however, that, as explained above, a significant proportion of the PIP is intended to reflect losses inherent in the loan portfolio that is less than 90 days delinquent and hence recorded as performing. This metric should be considered in conjunction with other credit risk and collateral information including that contained in page 31.

The total net impairment charge in Consumer Banking in the first half of 2010 improved by $264 million or 47 per cent over 30 June 2009 and by $190 million or 39 per cent over 31 December 2009. The lower individual impairment in the first half of 2010 compared to both the first and second halves of 2009 is visible across all of our major markets, particularly in Korea, Hong Kong, and Other Asia Pacific.

There was a portfolio impairment release of $52 million in the first half of 2010 (compared to a charge of $48 million in the first half of 2009 and $6 million in the second half 2009) as a direct result of the improvement in portfolio performance indicators as macroeconomic conditions strengthened in our markets.

Consumer Banking continued

The following tables set out the total non-performing loans for Consumer Banking:

	30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Loans and advances
Gross non-performing	67	52	169	431	64	270	36	96	1,185
Individual impairment provision	(33)	(20)	(54)	(180)	(25)	(123)	(14)	(61)	(510)
Non-performing loans net of individual impairment provision	34	32	115	251	39	147	22	35	675
Portfolio impairment provision									(468)
Net non-performing loans and advances									207
Cover ratio									83%

	30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Loans and advances
Gross non-performing	90	59	315	589	65	225	39	171	1,553
Individual impairment provision	(56)	(21)	(70)	(243)	(13)	(92)	(14)	(104)	(613)
Non-performing loans net of individual impairment provision	34	38	245	346	52	133	25	67	940
Portfolio impairment provision									(500)
Net non-performing loans and advances									440
Cover ratio									72%

	31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Loans and advances
Gross non-performing	80	47	190	482	65	263	28	97	1,252
Individual impairment provision	(64)	(20)	(63)	(212)	(17)	(91)	(10)	(61)	(538)
Non-performing loans net of individual impairment provision	16	27	127	270	48	172	18	36	714
Portfolio impairment provision									(519)
Net non-performing loans and advances									195
Cover ratio									84%

Consumer Banking continued

The tables below set out the net impairment charge by geography:

	6 months ended 30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Gross impairment charge	40	28	85	148	71	120	16	6	514
Recoveries/provisions no longer required	(14)	(9)	(18)	(75)	(21)	(19)	(5)	(2)	(163)
Net individual impairment charge	26	19	67	73	50	101	11	4	351
Portfolio impairment provision release									(52)
Net impairment charge									299

	6 months ended 30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Gross impairment charge	76	35	102	223	77	115	15	14	657
Recoveries/provisions no longer required	(16)	(10)	(8)	(70)	(11)	(20)	(5)	(2)	(142)
Net individual impairment charge	60	25	94	153	66	95	10	12	515
Portfolio impairment provision charge									48
Net impairment charge									563

	6 months ended 31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Gross impairment charge	63	29	98	201	86	141	16	19	653
Recoveries/provisions no longer required	(22)	(10)	(13)	(80)	(15)	(19)	(6)	(5)	(170)
Net individual impairment charge	41	19	85	121	71	122	10	14	483
Portfolio impairment provision charge									6
Net impairment charge									489

Wholesale Banking

Loans are classified as impaired and considered non-performing where analysis and review indicates that full payment of either interest or principal is questionable, or as soon as payment of interest or principal is 90 days overdue. Impaired accounts are managed by our specialist recovery unit, GSAM, which is separate from our main businesses. Where any amount is considered irrecoverable, an individual impairment provision is raised. This provision is the difference between the loan carrying amount and the present value of estimated future cash flows.

The individual circumstances of each customer are taken into account when GSAM estimates future cash flow. All available sources, such as cash flow arising from operations, selling assets or subsidiaries, realising collateral or payments under guarantees, are considered. In any decision relating to the raising of provisions, we attempt to balance economic conditions, local knowledge and experience, and the results of independent asset reviews.

Where it is considered that there is no realistic prospect of recovering a portion of an exposure against which an impairment provision has been raised, that amount will be written off.

As with Consumer Banking, a PIP is held to cover the inherent risk of losses which, although not identified, are known through experience to be present in any loan portfolio. In Wholesale Banking, this is set with reference to historic loss rates and subjective factors such as the economic environment and the trends in key portfolio indicators. The PIP methodology provides for accounts for which an individual impairment provision has not been raised.

Gross non-performing loans in Wholesale Banking have increased by $576 million or 23 per cent since June 2009 and by $351 million or 13 per cent since December 2009. This is largely due to the downgrade of one significant account within the MESA region. The cover ratio reflects the extent to which gross non-performing loans are covered by individual and portfolio impairment provisions. The cover ratio decreased from 59 per cent as at 30 June 2009 and 65 per cent as at 31 December 2009 to 56 per cent as at 30 June 2010 as a result of the downgrade of the single account referred to above. Excluding the impact of this single account, the cover ratio would be only marginally lower than the cover ratio as at 31 December 2009. The balance uncovered by individual impairment provisions represents the value of collateral held and the Group's estimate of the net outcome of any work-out strategy.

The total net impairment charge in the first half of 2010 was significantly lower than in the first half of 2009 (lower by $387 million) and the second half of 2009 (lower by $285 million) reflecting the improving credit environment.

This improvement, along with strengthening key portfolio quality indicators in the first half of 2010, led to a moderate reduction in the PIP balance since December 2009.

Wholesale Banking continued

The following tables set out the total non-performing loans for Wholesale Banking:

	30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Loans and advances
Gross non-performing	152	28	345	662	184	1,336	104	300	3,111
Individual impairment provision	(120)	(5)	(182)	(380)	(69)	(510)	(53)	(115)	(1,434)
Non-performing loans net of individual impairment provision	32	23	163	282	115	826	51	185	1,677
Portfolio impairment provision									(315)
Net non-performing loans and advances									1,362
Cover ratio									56%

	30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Loans and advances
Gross non-performing	248	22	348	723	112	756	124	202	2,535
Individual impairment provision	(133)	(5)	(141)	(385)	(50)	(389)	(44)	(99)	(1,246)
Non-performing loans net of individual impairment provision	115	17	207	338	62	367	80	103	1,289
Portfolio impairment provision									(255)
Net non-performing loans and advances									1,034
Cover ratio									59%

	31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Loans and advances
Gross non-performing	207	10	352	780	207	855	160	189	2,760
Individual impairment provision	(117)	(7)	(204)	(408)	(74)	(469)	(53)	(115)	(1,447)
Non-performing loans net of individual impairment provision	90	3	148	372	133	386	107	74	1,313
Portfolio impairment provision									(357)
Net non-performing loans and advances									956
Cover ratio									65%

Wholesale Banking continued

The tables below set out the net impairment charge by geography:

	6 months ended 30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Gross impairment charge	9	-	62	38	12	61	6	16	204
Recoveries/provisions no longer required	(2)	-	-	(9)	(3)	(3)	(2)	(11)	(30)
Net individual impairment charge	7	-	62	29	9	58	4	5	174
Portfolio impairment provision release									(36)
Net impairment charge									138

	6 months ended 30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Gross impairment charge	31	1	62	75	22	298	2	7	498
Recoveries/provisions no longer required	(3)	-	-	(6)	(2)	(2)	(1)	(5)	(19)
Net individual impairment charge	28	1	62	69	20	296	1	2	479
Portfolio impairment provision charge									46
Net impairment charge									525

	6 months ended 31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Gross impairment charge	21	2	49	119	33	96	13	51	384
Recoveries/provisions no longer required	(5)	(5)	(18)	(17)	(4)	(4)	(2)	(2)	(57)
Net individual impairment charge/(release)	16	(3)	31	102	29	92	11	49	327
Portfolio impairment provision charge									96
Net impairment charge									423

Movement in Group Individual impairment provision
The following tables set out the movements in our total individual impairment provision against loans and advances:
	30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Provisions held at 1 January 2010	181	27	267	620	91	560	63	176	1,985
Exchange translation differences	(1)	-	(12)	12	-	(6)	(4)	(1)	(12)
Amounts written off	(70)	(27)	(145)	(202)	(65)	(83)	(8)	(11)	(611)
Recoveries of acquisition fair values	-	-	-	(12)	-	(2)	-	-	(14)
Recoveries of amounts previously written off	12	6	6	55	12	10	1	2	104
Discount unwind	(2)	-	(7)	(10)	(3)	(6)	-	(2)	(30)
Other	-	-	(2)	(5)	-	1	-	5	(1)
New provisions	49	28	147	186	83	181	22	20	716
Recoveries/provisions no longer required	(16)	(9)	(18)	(84)	(24)	(22)	(7)	(13)	(193)
Net charge against profit	33	19	129	102	59	159	15	7	523
Provisions held at 30 June 2010	153	25	236	560	94	633	67	176	1,944

	30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Provisions held at 1 January 2009	164	20	154	605	44	170	54	113	1,324
Exchange translation differences	-	-	2	5	1	-	2	10	20
Amounts written off	(74)	(26)	(88)	(222)	(76)	(87)	(10)	(7)	(590)
Recoveries of acquisition fair values	-	-	(2)	(11)	-	(1)	-	-	(14)
Recoveries of amounts previously written off	14	7	(2)	44	9	11	1	1	85
Discount unwind	(3)	(1)	(6)	(14)	(1)	-	-	(5)	(30)
Other	-	-	(3)	-	-	(1)	-	77	73
New provisions	107	36	164	297	99	411	17	21	1,152
Recoveries/provisions no longer required	(19)	(10)	(8)	(76)	(13)	(22)	(6)	(7)	(161)
Net charge against profit	88	26	156	221	86	389	11	14	991
Provisions held at 30 June 2009	189	26	211	628	63	481	58	203	1,859

	31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Provisions held at 1 July 2009	189	26	211	628	63	481	58	203	1,859
Exchange translation differences	-	-	19	21	3	(6)	1	(9)	29
Amounts written off	(80)	(24)	(127)	(279)	(86)	(131)	(14)	2	(739)
Recoveries of acquisition fair values	-	-	(5)	(18)	-	(3)	-	-	(26)
Recoveries of amounts previously written off	18	7	8	56	10	8	(1)	2	108
Discount unwind	(3)	-	(7)	(13)	(1)	(6)	(2)	3	(29)
Other	-	-	52	1	2	-	-	(80)	(25)
New provisions	84	33	147	321	119	240	29	62	1,035
Recoveries/provisions no longer required	(27)	(15)	(31)	(97)	(19)	(23)	(8)	(7)	(227)
Net charge against profit	57	18	116	224	100	217	21	55	808
Provisions held at 31 December 2009	181	27	267	620	91	560	63	176	1,985

Debt securities and treasury bills
Debt securities and treasury bills are analysed as follows:
	30.06.10			30.06.09
	Debt securities	Treasury bills	Total	Debt securities	Treasury bills	Total
	$million	$million	$million	$million	$million	$million
Net impaired securities:
Impaired securities	239	-	239	169	26	195
Impairment provisions	(162)	-	(162)	(168)	(2)	(170)
	77	-	77	1	24	25
Securities neither past due nor impaired:
AAA	9,015	2,697	11,712	9,797	334	10,131
AA- to AA+	20,260	11,216	31,476	21,627	8,295	29,922
A- to A+	19,186	9,293	28,479	19,036	9,767	28,803
BBB- to BBB+	8,071	1,695	9,766	4,325	1,997	6,322
Lower than BBB-	3,073	1,089	4,162	2,206	1,006	3,212
Unrated	6,328	459	6,787	4,810	343	5,153
	65,933	26,449	92,382	61,801	21,742	83,543

	66,010	26,449	92,459	61,802	21,766	83,568
Of which:
Held at fair value through profit or loss	11,752	5,794	17,546	8,476	4,096	12,572

				31.12.09
				Debt securities	Treasury bills	Total
				$million	$million	$million
Net impaired securities:
Impaired securities				231	-	231
Impairment provisions				(191)	-	(191)
				40	-	40
Securities neither past due nor impaired:
AAA				10,706	630	11,336
AA- to AA+				21,246	9,618	30,864
A- to A+				17,770	10,757	28,527
BBB- to BBB+				7,243	1,930	9,173
Lower than BBB-				2,422	1,193	3,615
Unrated				5,805	389	6,194
				65,192	24,517	89,709

				65,232	24,517	89,749
Of which:
Held at fair value through profit or loss				10,111	5,559	15,670

The impaired debt securities largely includes the Group's holdings of asset backed securities, on which a $15 million (30 June 2009: $23 million, 31 December 2009: $43 million) impairment charge was taken in 30 June 2010. There has been no significant movement in provisions on impaired securities since December 2009.

The above table also analyses debt securities and treasury bills which are neither past due nor impaired by external credit rating. The standard credit ratings used by the Group are those used by Standard & Poors or their equivalent. Debt securities held which have a short-term rating are reported against the long-term rating of the issuer. For securities which are unrated, the Group applies an internal credit rating as described under Loans and Advances.

Unrated securities primarily relate to corporate issues. Using internal credit ratings, $5,875 million (30 June 2009: $4,078 million, 31 December 2009: $5,674 million) of these securities are considered to be equivalent to investment grade and $912 million (30 June 2009: $1,075 million, 31 December 2009: $520 million) sub-investment grade.

Asset backed securities
Total exposures to asset backed securities
		30.06.10				30.06.09
		Percentage				Percentage
		of notional		Carrying	Fair	of notional		Carrying	Fair
		value of	Notional	value	value¹	value of	Notional	value	value¹
		portfolio	$million	$million	$million	portfolio	$million	$million	$million
Residential Mortgage Backed Securities ('RMBS')
- US Alt-A		2%	69	39	30	2%	79	49	25
- US Prime		-	1	-	-	-	1	1	1
- Other		26%	777	730	700	23%	823	758	607
Collateralised Debt Obligations ('CDOs')
- Asset Backed Securities		2%	69	12	11	4%	159	20	17
- Other CDOs		11%	322	273	268	10%	367	292	233
Commercial Mortgage Backed Securities ('CMBS')
- US CMBS		5%	135	119	110	4%	142	125	84
- Other		20%	587	432	381	19%	686	485	339
Other Asset Backed Securities ('Other ABS')		34%	1,028	960	967	38%	1,388	1,268	1,185
		100%	2,988	2,565	2,467	100%	3,645	2,998	2,491
Of which included within:
- Financial assets held at fair value through profit or loss		2%	50	48	48	-	-	-	-
- Investment securities - available-for-sale		28%	828	586	586	27%	972	539	539
- Investment securities - loans and receivables		70%	2,110	1,931	1,833	73%	2,673	2,459	1,952
		100%	2,988	2,565	2,467	100%	3,645	2,998	2,491

						31.12.09
						Percentage
						of notional		Carrying	Fair
						value of	Notional	value	value¹
						portfolio	$million	$million	$million
Residential Mortgage Backed Securities ('RMBS')
- US Alt-A						2%	74	42	31
- US Prime						-	1	-	-
- Other						24%	819	767	708
Collateralised Debt Obligations ('CDOs')
- Asset Backed Securities						2%	77	13	10
- Other CDOs						10%	353	285	273
Commercial Mortgage Backed Securities ('CMBS')
- US CMBS						4%	139	122	108
- Other						19%	664	480	373
Other Asset Backed Securities ('Other ABS')						39%	1,315	1,227	1,204
						100%	3,442	2,936	2,707
Of which included within:
- Financial assets held at fair value through profit or loss						3%	103	97	97
- Investment securities - available-for-sale						26%	903	608	608
- Investment securities - loans and receivables						71%	2,436	2,231	2,002
						100%	3,442	2,936	2,707

¹	Fair value reflects the value of the entire portfolio, including assets redesignated to loans and receivables

Asset backed securities continued

The carrying value of asset backed securities represents 0.5 per cent (30 June 2009: 0.7 per cent, 31 December 2009: 0.7 per cent) of our total assets.

The notional value of the ABS portfolio fell by approximately $450 million during the first half of 2010 due to natural redemptions in the portfolio and some asset sales. The difference between carrying value and fair value of the remaining portfolio narrowed to approximately $100 million at 30 June 2010, benefiting from both the redemptions and a recovery in market prices in certain asset classes.

The credit quality of the asset backed securities portfolio remains strong. With the exception of those securities subject to an impairment charge, 76 per cent of the overall portfolio is rated A or better, and 30 per cent of the overall portfolio is rated as AAA. The portfolio is broadly diversified across asset classes and geographies, and there is no direct exposure to the US sub-prime market. The portfolio has an average credit grade of A+, down by one notch since December 2009.

28 per cent of the overall portfolio is invested in RMBS, with a weighted average credit rating of AA (AA in 2009). 46 per cent of the residential mortgage exposures were originated in 2005 or earlier.

13 per cent of the overall portfolio is in CDOs. This includes $69 million of exposures to Mezzanine and High Grade CDOs of ABS, of which $50 million have been impaired. The remainder of the CDOs has a weighted average credit rating of A+ (AA+ in 2008).

25 per cent of the overall portfolio is in CMBS, of which $135 million is in respect of US CMBS with a weighted average credit grade of AA- (AAA in 2009). The weighted average credit rating of the Other CMBS is A- (A- in 2009).

34 per cent of the overall portfolio is in Other ABS, which includes securities backed by credit card receivables, bank collateralised loan obligations, future flows and student loans, with a weighted credit rating of AA-.

The Group reclassified some asset backed securities from trading and available-for-sale to loans and receivables with effect from 1 July 2008. The securities were reclassified at their fair value on the date of reclassification. Note 10 on page 75 provides details of the remaining balance of those assets reclassified in 2008. No assets were reclassified in the six months to 30 June 2010 or during 2009.

Writedowns of asset backed securities
	Available- for-sale	Loans and receivables	Total
	$million	$million	$million
Six months to 30 June 2010
Credit to available-for-sale reserves	32	-	32
Charge to the profit and loss account	(15)	-	(15)
Six months to 31 December 2009
Credit to available-for-sale reserves	60	-	60
Charge to the profit and loss account	(47)	(7)	(54)
Six months to 30 June 2009
Charge to available-for-sale reserves	(34)	-	(34)
Charge to the profit and loss account	(23)	-	(23)

Country cross-border risk

Country cross-border risk is the risk that we will be unable to obtain payment from our customers or third parties on their contractual obligations as a result of certain actions taken by foreign governments, chiefly relating to convertibility and transferability of foreign currency.

The GRC is responsible for our country cross-border risk limits and delegates the setting and management of country limits to the Group Country Risk function.

The business and country chief executive officers manage exposures within these limits and policies. Countries designated as higher risk are subject to increased central monitoring.

Cross-border assets comprise loans and advances, interest-bearing deposits with other banks, trade and other bills, acceptances, amounts receivable under finance leases, derivatives, certificates of deposit and other negotiable paper, investment securities and formal commitments where the counterparty is resident in a country other than where the assets are recorded. Cross-border assets also include exposures to local residents denominated in currencies other than the local currency.

Our cross-border exposure to China, India, and UAE has risen significantly over the past year, reflecting our focus and continued expansion in our core countries.

The increase in our China cross border exposure over the past year reflects growth across many business and product segments. In Hong Kong our cross border exposure reduced in the first six months of 2010, as the local business strategically switched some focus from foreign currency to local currency lending.

Increased cross-border exposure for India reflects growth in short term trade business and higher Corporate Finance activity. Cross-border exposure to the UAE has increased as we grew our core business with particular emphasis on the Abu Dhabi portfolio.

Cross-border exposure to countries in which we do not have a significant presence predominantly relates to short-dated money market activity, and some global corporate business. Such business is originated in our footprint countries with counterparties domiciled outside our footprint. This explains our significant exposure in the US and France as described in the table below.

The table below, which is based on our internal cross-border country risk reporting requirements, shows cross-border outstandings where they exceed one per cent of total assets.

	30.06.10			30.06.09			31.12.09
	One year or less	Over one year	Total	One year or less	Over one year	Total	One year or less	Over one year	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
US	13,674	5,686	19,360	12,047	6,157	18,204	14,484	5,604	20,088
India	12,396	11,040	23,436	9,517	8,008	17,525	8,370	10,470	18,840
Hong Kong	11,578	4,215	15,793	11,103	4,629	15,732	12,410	4,856	17,266
Singapore	11,629	3,497	15,126	9,824	3,142	12,966	13,135	3,411	16,546
South Korea	8,519	5,945	14,464	9,032	6,952	15,984	8,555	6,500	15,055
United Arab Emirates	7,491	9,501	16,992	5,549	6,808	12,357	5,807	9,071	14,878
China	9,590	5,507	15,097	4,277	2,937	7,214	5,979	4,007	9,986
France	3,902	1,691	5,593	3,108	2,333	5,441	5,680	2,328	8,008

Market risk

We recognise market risk as the potential for loss of earnings or economic value due to adverse changes in financial market rates or prices. Our exposure to market risk arises principally from customer-driven transactions. The objective of our market risk policies and processes is to obtain the best balance of risk and return whilst meeting customers' requirements.

The primary categories of market risk for Standard Chartered are:

• interest rate risk: arising from changes in yield curves, credit spreads and implied volatilities on interest rate options

• currency exchange rate risk: arising from changes in exchange rates and implied volatilities on foreign exchange options

• commodity price risk: arising from changes in commodity prices and implied volatilities on commodity options, covering energy, precious metals, base metals and agriculture

• equity price risk: arising from changes in the prices of equities, equity indices, equity baskets and implied volatilities on related options.

Market risk governance

The Group Risk Committee (GRC) approves our market risk appetite taking account of market volatility, the range of products and asset classes, business volumes and transaction sizes. Market risk appetite has remained broadly stable in the first half of 2010.

The Group Market Risk Committee (GMRC), under authority delegated by the GRC, is responsible for setting Value at Risk (VaR) and stress loss triggers for market risk within our risk appetite. The GMRC is also responsible for policies and other standards for the control of market risk and overseeing their effective implementation. These policies cover both trading and non-trading books of the Group. The trading book is defined as per the FSA Handbook's Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU). This is more restrictive than the broader definition within IAS 39 'Financial Instruments: Recognition and Measurement', as the FSA only permits certain types of financial instruments or arrangements to be included within the trading book. Limits by location and portfolio are proposed by the businesses within the terms of agreed policy.

Group Market Risk (GMR) approves the limits within delegated authorities and monitors exposures against these limits. Additional limits are placed on specific instruments and position concentrations where appropriate. Sensitivity measures are used in addition to VaR as risk management tools. For example, interest rate sensitivity is measured in terms of exposure to a one basis point increase in yields, whereas foreign exchange, commodity and equity sensitivities are measured in terms of the underlying values or amounts involved. Option risks are controlled through revaluation limits on underlying price and volatility shifts, limits on volatility risk and other variables that determine the option's value.

Value at Risk ('VaR')

We measure the risk of losses arising from future potential adverse movements in market rates, prices and volatilities using a VaR methodology. VaR, in general, is a quantitative measure of market risk that applies recent historical market conditions to estimate the potential future loss in market value that will not be exceeded in a set time period at a set statistical confidence level. VaR provides a consistent measure that can be applied across trading businesses and products over time and can be set against actual daily profit and loss outcome.

VaR is calculated for expected movements over a minimum of one business day and to a confidence level of 97.5 per cent. This confidence level suggests that potential daily losses, in excess of the VaR measure, are likely to be experienced six times per year.

We apply two VaR methodologies:

• historical simulation: involves the revaluation of all existing positions to reflect the effect of historically observed changes in market risk factors on the valuation of the current portfolio. This approach is applied for general market risk factors

• Monte Carlo simulation: this methodology is similar to historical simulation but with considerably more input risk factor observations. These are generated by random sampling techniques, but the results retain the essential variability and correlations of historically observed risk factor changes. This approach is applied for credit spread VaR

In both methods an historical observation period of one year is chosen and applied.

VaR is calculated as our exposure as at the close of business, generally London time. Intra-day risk levels may vary from those reported at the end of the day.

Back testing

To assess their predictive power, VaR models are back tested against actual results. In the first half of 2010 there were no exceptions in the regulatory back testing, compared with one in 2009. This is well within the 'green zone' applied internationally to internal models by bank supervisors, and implies that model reliability is statistically greater than 95 per cent.

Stress testing

Losses beyond the confidence interval are not captured by a VaR calculation, which therefore gives no indication of the size of unexpected losses in these situations.

GMR complements the VaR measurement by weekly stress testing of market risk exposures to highlight the potential risk that may arise from extreme market events that are rare but plausible.

Stress testing is an integral part of the market risk management framework and considers both historical market events and forward-looking scenarios. A consistent stress testing methodology is applied to trading and non-trading books. The stress testing methodology assumes that scope for management action would be limited during a stress event, reflecting the decrease in market liquidity that often occurs.

Stress scenarios are regularly updated to reflect changes in risk profile and economic events. The GMRC has responsibility for reviewing stress exposures and, where necessary, enforcing reductions in overall market risk exposure. The GRC considers the results of stress tests as part of its supervision of risk appetite.

Regular stress test scenarios are applied to interest rates, credit spreads, exchange rates, commodity prices and

Market risk continued

equity prices. This covers all asset classes in the Financial Markets banking and trading books.

Ad hoc scenarios are also prepared reflecting specific market conditions and for particular concentrations of risk that arise within the businesses.

Market risk changes

Total average VaR declined in the first half of 2010 compared to both the second half of 2009 and the first half of 2009. This stemmed mainly from the non-trading book VaR, and reflected decreasing volatility of credit spreads that followed a sharp increase after the collapse of Lehman Brothers in September 2008. The one year historical data window applied as an input to the VaR model continued to reflect this period of particularly high credit spread volatility throughout most of 2009, but its impact tailed off in the second half of 2009. Average trading book VaR also declined in the first half of 2010 across asset classes.

There have been three significant changes of VaR coverage during 2009 and 2010 which have affected Total VaR as follows:

• Group Treasury positions were transferred from VaR to net interest income sensitivity basis from the start of 2010 (see details below). This resulted in a $3.6 million reduction in total VaR in the first half of 2010.

• The listed part of the private equities portfolio was included in non-trading VaR from October 2009 resulting in an increase of $3 million in total VaR in the second half of 2009.

• Securities classed as loans and receivables or held to maturity were removed from VaR in June 2009. These non-traded securities are accounted for on an amortised cost basis, so market price movements have no effect on either profit and loss or reserves. This alignment of VaR with accounting treatment resulted in an $8.6 million reduction in total VaR at the time of implementation.

Daily value at risk (VaR at 97.5%, 1 day)
		6 months to 30.06.10				6 months to 30.06.09
		Average	High³	Low³	Actual⁴	Average	High³	Low³	Actual⁴
Trading and Non-trading		$million	$million	$million	$million	$million	$million	$million	$million
Interest rate risk¹		21.6	25.5	16.3	16.3	41.6	46.7	35.3	35.6
Foreign exchange risk		5.8	12.5	3.3	6.8	8.2	16.1	4.5	6.5
Commodity risk		2.0	4.0	0.7	0.7	3.2	5.5	1.3	4.2
Equity risk		10.3	11.3	9.4	9.8	1.7	2.8	1.0	2.1
Total²		23.9	31.0	18.6	19.7	42.9	47.9	36.1	36.8
						6 months to 31.12.09
						Average	High³	Low³	Actual⁴
Trading and Non-trading						$million	$million	$million	$million
Interest rate risk¹						33.2	40.7	24.7	25.5
Foreign exchange risk						7.4	13.3	3.5	5.0
Commodity risk						2.9	5.5	1.3	3.7
Equity risk						6.0	11.1	2.9	10.8
Total²						35.1	40.8	27.6	31.8
		6 months to 30.06.10				6 months to 30.06.09
		Average	High³	Low³	Actual⁴	Average	High³	Low³	Actual⁴
Trading		$million	$million	$million	$million	$million	$million	$million	$million
Interest rate risk¹		9.3	11.9	6.3	6.3	10.9	14.2	8.7	10.5
Foreign exchange risk		5.8	12.5	3.3	6.8	8.2	16.1	4.5	6.5
Commodity risk		2.0	4.0	0.7	0.7	3.2	5.5	1.3	4.2
Equity risk		2.0	2.9	1.3	1.5	1.7	2.8	1.0	2.1
Total²		12.0	16.7	8.7	11.7	13.7	18.0	9.9	16.6
						6 months to 31.12.09
						Average	High³	Low³	Actual⁴
Trading						$million	$million	$million	$million
Interest rate risk¹						12.5	17.8	9.3	10.5
Foreign exchange risk						7.4	13.3	3.5	5.0
Commodity risk						2.9	5.5	1.3	3.7
Equity risk⁵						3.0	3.6	2.1	2.5
Total²						15.3	19.3	12.6	13.2

¹	Interest rate risk VaR includes credit spread risk arising from securities held for trading or available-for-sale.
²	The total VaR shown in the tables above is not a sum of the component risks due to offsets between them.
³	Highest and lowest VaR for each risk factor are independent and usually occur on different days.
⁴	Actual one day VAR at period end date.
⁵	Non-trading equity risk VaR was included only from October 2009. For the period October to December 2009, non-trading equity risk VaR average was $9.1 million, with a low of $8.7 million.

Market risk continued

		6 months to 30.06.10				6 months to 30.06.09
		Average	High³	Low³	Actual⁴	Average	High³	Low³	Actual⁴
Non-trading		$million	$million	$million	$million	$million	$million	$million	$million
Interest rate risk¹		17.1	22.2	11.8	12.9	36.3	41.0	31.4	31.4
Equity risk⁵		9.5	10.0	9.1	9.8	-	-	-	-
Total²		19.7	23.2	15.7	16.0	36.3	41.0	31.4	31.4

						6 months to 31.12.09
						Average	High³	Low³	Actual⁴
Non-trading						$million	$million	$million	$million
Interest rate risk¹						28.6	35.9	20.8	22.2
Equity risk⁵						3.5	9.9	-	9.1
Total²						29.3	35.9	22.6	23.5

¹	Interest rate risk VaR includes credit spread risk arising from securities held for trading or available-for-sale.
²	The total VaR shown in the tables above is not a sum of the component risks due to offsets between them.
³	Highest and lowest VaR for each risk factor are independent and usually occur on different days.
⁴	Actual one day VaR as at period end date.
⁵	Non-trading equity risk VaR was included only from October 2009. For the period October to December 2009, non-trading equity risk VaR average was $9.1 million, with a low of $8.7 million

Average daily income earned from market risk related activities
Trading	6 months to 30.06.10	6 months to 30.06.09	6 months to 31.12.09
Trading	$million	$million	$million
Interest rate risk	6.1	7.7	2.3
Foreign exchange risk	5.2	6.4	4.1
Commodity risk	0.9	1.3	0.7
Equity risk	0.4	0.1	0.4
Total	12.6	16.0	7.6

Non-Trading
Interest rate risk	4.0	5.6	3.6
Equity risk	0.2	1.0	1.0
Total	4.2	6.6	4.6

Market risk continued

Market risk VaR coverage

Interest rate risk from across the non-trading book portfolios is always transferred to Financial Markets where it is managed by Asset and Liability Management (ALM) under the supervision of local Asset and Liability Committees (ALCO). ALM deals in the market in approved financial instruments in order to manage the net interest rate risk, subject to approved VaR and risk limits.

VaR and stress tests are therefore applied to these non-trading book exposures in the same way as for the trading book, including listed available for sale securities. Securities classed as Loans and receivables or Held to maturity are not reflected in VaR or stress tests since they are accounted on an amortised cost basis, so market price movements have no effect on either profit and loss or reserves.

Foreign exchange risk on the non-trading book portfolios is minimised by match funding assets and liabilities in the same currency. Structural foreign exchange currency risks are not included within Group VaR.

Equity risk relating to non-listed Private Equity and strategic investments is not included within the VaR. It is separately managed through delegated limits for both investment and divestment, and is also subject to regular review by an investment committee.

Group Treasury market risk

The proceeds of Group Treasury's debt and equity capital raising activities are invested within the Group as capital or placed with ALM. Interest rate risk arises due to the investment of equity and reserves into rate-sensitive assets, as well as some tenor mismatches between debt issuance and placements. This risk is hedged to floating rate, and measured using the projected sensitivity of net interest income (NII) to a parallel shift in yield curves and interest rate gap re-pricing tables and is monitored over a one-year time horizon (see table below).

This risk is monitored and controlled by the Group's Capital Management Committee (CMC).

Group Treasury

NII sensitivity to parallel shifts in yield curves

	30.06.10	30.06.09	31.12.09
	$million	$million	$million
+25 basis points	21.5	13.3	14.0
-25 basis points	(21.5)	(13.3)	(14.0)

Group Treasury also manages the structural foreign exchange risk that arises from non-US dollar currency net investments in branches and subsidiaries. The impact of foreign exchange movements is taken to reserves which form part of the capital base. The effect of exchange rate movements on the capital ratio is partially mitigated by the fact that both the value of these investments and the risk weighted assets in those currencies follow broadly the same exchange rate movements. With the approval of CMC, Group Treasury may hedge the net investments if it is anticipated that the capital ratio will be materially affected by exchange rate movements. At 30 June 2010, the Group had taken net investment hedges of $803 million (30 June 2009: $1,333 million; 31 December 2009: $644 million) to partly cover its exposure to Korean won and $nil million (30 June 2009: $558 million; 31 December 2009: $94 million) to partly cover its exposure to Taiwanese dollars.

The table below sets out the principal structural foreign exchange exposures (net of investment hedges) of the Group:

	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Hong Kong dollar	6,248	5,405	5,852
Korean won	4,944	3,765	5,133
Indian rupee	3,159	2,766	2,828
Taiwanese dollar	2,365	1,461	2,071
Thai baht	1,347	1,262	1,291
UAE dirham	1,193	1,151	1,008
Singapore dollar	739	375	986
Malaysian ringgit	949	761	834
Chinese yuan	1,217	896	795
Indonesian rupiah	734	557	595
Pakistani rupee	592	563	562
Other	2,438	2,118	2,293
	25,925	21,080	24,248

Market risk regulatory capital

At Group level, the FSA specifies minimum capital requirements against market risk. The FSA has granted the Group CAD2 internal model approval covering the majority of interest rate and foreign exchange risk as well as precious and base metals market risk. Positions outside the CAD2 scope are assessed according to standard FSA rules.

At 30 June 2010 our market risk regulatory capital requirement was $1.4 billion (31 December 2009: $1.6 billion; 30 June 2009: $1.4 billion).

Derivatives

Derivatives are contracts with characteristics and value derived from underlying financial instruments, interest and exchange rates or indices. They include futures, forwards, swaps and options transactions. Derivatives are an important risk management tool for banks and their customers because they can be used to manage market price risk. The market risk of derivatives is managed in essentially the same way as other traded products.

Our derivative transactions are principally in instruments where the mark-to-market values are readily determinable by reference to independent prices and valuation quotes.

We enter into derivative contracts in the normal course of business to meet customer requirements and to manage our exposure to fluctuations in market price movements.

Derivatives are carried at fair value and shown in the balance sheet as separate totals of assets and liabilities. Recognition of fair value gains and losses depends on whether the derivatives are classified as trading or held for hedging purposes.

The credit risk arising from all financial derivatives is managed as part of the overall lending limits to financial institutions and corporate customers. This is covered in more detail in the Credit risk section.

Hedging

Countries within the Group use futures, forwards, swaps and options transactions primarily to mitigate interest and foreign exchange risk arising from their in-country exposures. The Group also uses futures, forwards and options to hedge foreign exchange and interest rate risk.

Market risk continued

In accounting terms under IAS 39, hedges are classified into three types: fair value hedges, predominantly where fixed rates of interest or foreign exchange are exchanged for floating rates; cash flow hedges, predominantly where variable rates of interest or foreign exchange are exchanged for fixed rates; and hedges of net investments in overseas operations translated to the parent company's functional currency, US dollars.

The use of interest rate swaps for the purposes of fair value and cash flow hedging increased in 2010 compared to December 2009, as we continued our focus on liquidity management. Currency swaps and forwards for fair value hedging increased primarily to hedge exposures in Taiwan, in view of the foreign exchange movements in the currency pair of US dollar and Taiwanese dollar in the first half of the year. In respect of cash flow hedging, during the second half of 2009 the Group started to use foreign exchange options in preference to forward foreign exchange contracts to provide more flexibility in managing the foreign exchange risks in elements of our non-US dollar cost base, and this has been further expanded through the first six months of 2010.

We may also, under certain individually approved circumstances, enter into economic hedges which do not qualify for IAS 39 hedge accounting treatment, and which are accordingly marked to market through the profit and loss account, thereby creating an accounting asymmetry. These are entered into primarily to ensure that residual interest rate and foreign exchange risks are being effectively managed.

Liquidity risk

It is our policy to maintain adequate liquidity at all times, in all geographic locations and for all currencies, and hence to be in a position to meet all obligations as they fall due. We manage liquidity risk both on a short-term and medium-term basis. In the short-term, our focus is on ensuring that the cash flow demands can be met through asset maturities, customer deposits and wholesale funding where required. In the medium-term, the focus is on ensuring the balance sheet remains structurally sound.

The GALCO is the responsible governing body that approves our liquidity management policies. The Liquidity Management Committee (LMC) receives authority from the GALCO and is responsible for setting liquidity limits and proposing liquidity risk policies and practices. Liquidity in each country is managed by the Country ALCO within the pre-defined liquidity limits set by the LMC and in compliance with Group liquidity policies and local regulatory requirements. The Group Treasury and Group Market Risk functions propose and oversee the implementation of policies and other controls relating to the above risks.

We seek to manage our liquidity prudently in all geographical locations and for all currencies. Exceptional market events can impact us adversely, thereby affecting our ability to fulfill our obligations as they fall due. The principal uncertainties for liquidity risk are that customer depositors withdraw their funds at a substantially faster rate than expected, or that repayment for asset maturities is not received on the intended day. To mitigate these uncertainties, our customer deposit base is diversified by type and maturity. In addition we have a portfolio of liquid assets that can be realised if a liquidity stress occurs, as well as ready access to wholesale funds under normal market conditions.

Policies and procedures

Due to the diversified nature of our business, our policy is that liquidity is more effectively managed locally, in-country. Each ALCO is responsible for ensuring that the country is self-sufficient, able to meet all its obligations to make payments as they fall due, and operates within the local regulations and liquidity limits set for the country.

Our liquidity risk management framework requires limits to be set for prudent liquidity management. There are limits on:

• the mismatch in local and foreign currency behavioural cash flows

• the level of wholesale borrowing to ensure that the size of this funding is proportionate to the local market and our local operations

• commitments, both on and off balance sheet, to ensure there are sufficient funds available in the event of drawdown on these commitments

• the advances to deposits ratio to ensure that commercial advances are funded by stable sources and that customer lending is funded by customer deposits

• the amount of medium-term funding to support the asset portfolio

• the amount of local currency funding sourced from foreign currency sources

In addition, we prescribe a liquidity stress scenario that assumes accelerated withdrawal of deposits over a period of time. Each country has to ensure that cash inflows exceed outflows under such a scenario.

All limits are reviewed at least annually, and more frequently if required, to ensure that they remain relevant given market conditions and business strategy. Compliance with limits is monitored independently on a regular basis by Group Market Risk. Limit excesses are escalated and approved under a delegated authority structure and reviewed by ALCO. Excesses are also reported monthly to the LMC and GALCO which provide further oversight.

In addition, regular reports to the ALCO include the following:

• information on the concentration and profile of debt maturities

• depositor concentration report to monitor reliance on large individual depositors

We have significant levels of marketable securities, principally government securities and bank paper, which can be realised, repo'd or used as collateral in the event that there is a need for liquidity in a crisis. In addition, liquidity crisis management plans are maintained by Group and within each country, and are reviewed and approved annually. The liquidity crisis management plan lays out trigger points and actions in the event of a liquidity crisis to ensure that there is an effective response by senior management.

Primary sources of funding

A substantial portion of our assets is funded by customer deposits made up of current and savings accounts and other deposits. These customer deposits, which are widely

Liquidity risk continued

diversified by type and maturity, represent a stable source of funds. The ALCO in each country monitors trends in the balance sheet and ensures that any concerns that might impact the stability of these deposits are addressed effectively. The ALCO also reviews balance sheet plans to ensure that projected asset growth is matched by growth in the stable funding base.

We maintain access to the interbank wholesale funding markets in all major financial centres and countries in which we operate. This seeks to ensure that we have flexibility around maturity transformation, have market intelligence, maintain stable funding lines and can obtain optimal pricing when we perform our interest rate risk management activities.

Liquidity metrics

We monitor key liquidity metrics on a regular basis. Liquidity is managed on a country basis and in aggregate across the Group. The key metrics are:

Advances to deposit ratio

This is defined as the ratio of total loans and advances to customers relative to total customer deposits. A low advances to deposits ratio demonstrates that customer deposits exceed customer loans resulting from emphasis placed on generating a high level of stable funding from customers.

	30.06.10 $million	30.06.09 $million	31.12.09 $million
Loans and advances to customers¹	219,355	184,952	201,803
Customer accounts²	287,740	235,972	256,746
	%	%	%
Advances to deposits ratio	76.2	78.4	78.6

¹ see note 14 on page 80.

² see note 21 on page 87.

Liquid asset ratio

This is the ratio of liquid assets to total assets. The significant level of holdings of liquid assets in the balance sheet reflects the application of our liquidity policies and practices. The following table shows the ratio of liquid assets to total assets:

	30.06.10 %	30.06.09 %	31.12.09 %
Liquid assets¹ to total assets ratio	27.2	24.1	26.2

¹ Liquid assets are the total of Cash (less restricted balances), net interbank, treasury bills and debt securities less illiquid securities.

Operational risk

Operational risk is the potential for loss arising from the failure of people, process or technology or the impact of external events. We seek to minimise our exposure to operational risk, subject to cost trade-offs. Operational risk exposures are managed through a consistent set of management processes that drive risk identification, assessment, control and monitoring.

The Group Operational Risk Committee (GORC) oversees the management of operational risks across the Group, supported by business, functional, and country-level committees. This formal structure of governance provides the GRC with confidence that operational risks are being proactively identified and effectively managed.

Group Operational Risk is responsible for setting and maintaining standards for operational risk management and measurement. In addition specialist operational risk control owners have responsibility for the management of operational risk arising from the following activities group-wide: regulatory compliance, legal processes, people management, technology management, vendor management, property management, security management, accounting and financial control, tax management, and corporate authorities and structure. Each risk control owner is responsible for identifying risks which are material to the group and for maintaining an effective control environment, which includes defining appropriate policies and procedures for approval by authorized risk committees.

Reputational risk

Reputational risk is the potential for damage to our franchise, resulting in loss of earnings or adverse impact on market capitalisation as a result of stakeholders taking a negative view of the organization or its actions.

Reputational risk will arise from the failure to effectively mitigate one or more of country, credit, liquidity, market, regulatory, operational, environmental or social risk. All employees are responsible for day to day identification and management of reputational risk.

The Wholesale Banking Responsibility and Reputational Risk Committee and the Consumer Banking Reputational Risk Committee have responsibility for managing reputational risk in their respective businesses, while the GRC provides oversight, sets Group-wide policy and monitors any material risk issues.

At country level, it is the responsibility of the country chief executive officer to protect our reputation in that market. To achieve this, the country chief executive officer and country management committee must actively:

• promote awareness and application of our policy and procedures regarding reputational risk

• encourage business and functions to take account of our reputation in all decision-making, including dealings with customers and suppliers

• implement effective in-country reporting systems to ensure they are aware of all potential issues

• promote effective, proactive stakeholder management

Pension risk

Pension risk is the potential for loss due to having to meet an actuarially assessed shortfall in the Group's pension schemes. Pension risk exposure is not concerned with the financial performance of our pension schemes but is focused upon the risk to our financial position arising from our need to meet our pension scheme funding obligations. The risk assessment is focused on our obligations towards our major pension schemes, ensuring that our funding obligation to these schemes is comfortably within our financial capacity. Pension risk is monitored on a quarterly basis, taking account of the actual variations in asset values and updated expectations regarding the progression of the pension fund assets and liabilities.

The Group Pensions Executive Committee is the body responsible for governance of pension risk and it receives its authority directly from the Court.

Standard Chartered PLC - Capital

Capital management

Our approach to capital management is driven by our desire to maintain a strong capital base to support the development of our business, to meet regulatory capital requirements at all times and to maintain good credit ratings.

Strategic, business and capital plans are drawn up annually covering a three year horizon and are approved by the Board. The capital plan ensures that adequate levels of capital and an optimum mix of the different components of capital are maintained to support our strategy.

The capital plan takes the following into account:

• regulatory capital requirements

• forecast demand for capital to support the credit ratings

• increases in demand for capital due to business growth, market shocks or stresses

• available supply of capital and capital raising options

• internal controls and governance for managing the Group's risk, performance and capital

We use a capital model to assess the capital demand for material risks, and support our internal capital adequacy assessment. Each material risk is assessed, relevant mitigants considered, and appropriate levels of capital determined. The capital modelling process is a key part of our management disciplines.

A strong governance and process framework is embedded in our capital planning and assessment methodology. Overall responsibility for the effective management of risk rests with the Board. The Board Risk Committee reviews specific risk areas and the issues discussed at the key capital management committees. The Group Asset and Liability Committee (GALCO) sets internal triggers and target ranges for capital management and oversees adherence with these.

Current compliance with Capital Adequacy Regulations

Our lead supervisor is the UK's Financial Services Authority (FSA). The capital that we are required to hold by the FSA is determined by our balance sheet, off-balance sheet, counterparty and other risk exposures. Further detail on counterparty and risk exposures is included in the Risk review on pages 21 to 49.

Capital in branches and subsidiaries is maintained on the basis of host regulators' regulatory requirements. Suitable processes and controls are in place to monitor and manage capital adequacy and ensure compliance with local regulatory ratios in all our legal entities. These processes are designed to ensure that we have sufficient capital available to meet local regulatory capital requirements at all times.

The table on page 51 summarises the consolidated capital position of the Group. The principal forms of capital are included in the following items on the consolidated balance sheet: share capital and reserves (called-up ordinary share capital and preference shares, and eligible reserves), subordinated liabilities (innovative Tier 1 securities and qualifying subordinated liabilities), and loans to banks and customers (portfolio impairment provision).

Movement in capital

On a Basel II basis, total capital has increased by $981 million since 31 December 2009. The issue of India Depository Receipts in June 2010 increased ordinary share capital and the $1,878 million increase in Core Tier 1 is primarily on account of retained profits, the proceeds from the Indian Depository Receipt issuance in India less the annual dividend, which was accounted for and paid during the period. Qualifying subordinated liabilities decreased by $485 million on account of the redemption of Lower Tier 2 securities amounting to approximately $500 million, foreign exchange translation of non-dollar denominated Tier 2 securities which are economically hedged but whose hedges are ignored for regulatory purposes and the issuance of $750 million Lower Tier 2 subordinated debt from Standard Chartered Bank (Hong Kong) Limited.

BaselII

The Basel Committee on Banking Supervision published a framework for the International Convergence of Capital Measurement and Capital Standards (commonly referred to as Basel II), which replaced the original 1988 Basel I Accord. Basel II is structured around three pillars which are outlined below:

• Pillar 1 sets out minimum regulatory capital requirements - the minimum amount of regulatory capital banks must hold against the risks they assume

• Pillar 2 sets out the key principles for the supervisory review of a bank's risk management framework and its capital adequacy. It sets out specific oversight responsibilities for the Board and senior management, reinforcing principles of internal control and other corporate governance practices

• Pillar 3 aims to bolster market discipline through enhanced disclosure by banks

Basel II provides three approaches of increasing sophistication for the calculation of credit risk capital; the Standardised Approach, the Foundation Internal Ratings Based Approach and the Advanced Internal Ratings Based Approach. Basel II also introduces capital requirements for operational risk for the first time.

The EU Capital Requirements Directive (CRD) is the means by which Basel II has been implemented in the EU. In the case of the provisions relating to the advanced approaches for credit risk and operational risk, implementation commenced from 1 January 2008. In the UK the CRD is implemented by the FSA through its General Prudential Sourcebook and its Prudential Sourcebook for Banks, Building Societies and Investment Firms.

From 1 January 2008, we have been using the Advanced Internal Ratings Based approach for the measurement of credit risk capital. This approach builds on our risk management practices and is the result of a significant investment in data warehousing and risk models.

We use Value at Risk (VaR) models for the measurement of market risk capital for part of our trading book exposures where permission to use such models has been granted by the FSA. Where our market risk exposures are not approved for inclusion in VaR models, the capital requirements are determined using standard rules provided by the regulator which are less risk sensitive.

We apply the Standardised Approach for determining the capital requirements for operational risk.

During the initial years of Basel II implementation, the minimum capital requirements were restricted by reference to the Basel I framework, so they could not fall below 80 per cent of the Basel I capital requirements in 2009. This restriction was due to expire at the end of 2009, but the FSA has decided to retain this capital floor indefinitely.

The GALCO targets Tier 1 and total capital ratios within a range of 7 to 9 per cent and 12 to 14 per cent respectively. In light of the uncertain economic environment and evolving regulatory debate on banks' capital structures, we believe it is appropriate to remain strongly capitalised above our target ranges.
		30.06.10	30.06.09	31.12.09
		$million	$million	$million
Tier 1 capital:
Called-up ordinary share capital		1,037	967	1,013
Eligible reserves¹		26,828	21,355	25,001
Non-controlling interests		274	238	256
Less: excess expected losses²		(590)	(517)	(502)
Less: securitisation		(138)	(75)	(97)
Goodwill and other intangible assets		(6,513)	(6,404)	(6,620)
Other regulatory adjustments		82	22	51
Core Tier 1 capital		20,980	15,586	19,102
Innovative Tier 1 securities		2,790	3,579	2,860
Less: restriction on Innovative Tier 1 securities		-	(275)	-
Preference shares		2,674	2,699	2,694
Tax on excess expected losses¹		177	154	163
Less: material holdings		(370)	(229)	(237)
Total Tier 1 capital		26,251	21,514	24,582
Tier 2 capital:
Eligible revaluation reserves		293	210	253
Portfolio impairment provision		258	262	242
Less: excess expected losses²		(590)	(517)	(502)
Qualifying subordinated liabilities:
Perpetual subordinated debt		1,447	1,558	1,535
Other eligible subordinated debt		9,150	9,404	9,547
Restricted Innovative Tier 1 Securities		-	275	-
Less: material holdings and securitisations		(508)	(304)	(335)
Total Tier 2 capital		10,050	10,888	10,740
Deductions from Tier 1 and Tier 2 capital		(55)	(78)	(57)
Total capital base		36,246	32,324	35,265

Risk weighted assets
Credit risk		190,001	166,554	173,315
Operational risk		26,972	20,696	20,696
Market risk		17,211	17,766	19,912
Total risk weighted assets		234,184	205,016	213,923
Capital ratios
Core Tier 1 capital		9.0%	7.6%	8.9%
Tier 1 capital		11.2%	10.5%	11.5%
Total capital ratio		15.5%	15.8%	16.5%

¹	The tax benefit on excess expected losses is included 50 per cent in eligible reserves and 50 per cent in tax on excess expected losses.
²	Excess expected losses are shown gross of any tax benefit.

Risk weighted assets
		30.06.10	30.06.09	31.12.09
		$million	$million	$million

Consumer Banking		59,547	51,761	53,215
Wholesale Banking		174,637	153,255	160,708
Total risk weighted assets		234,184	205,016	213,923

Hong Kong		27,781	19,293	24,706
Singapore		25,135	19,525	21,531
Korea		26,421	27,577	26,093
Other Asia Pacific		45,976	43,480	41,276
India		19,615	16,144	17,381
Middle East & Other S Asia		31,828	27,569	28,727
Africa		10,245	7,675	10,228
Americas, UK & Europe		53,827	50,280	52,921
		240,828	211,543	222,863
Less : Intra-group balances¹		(6,644)	(6,527)	(8,940)
Total risk weighted assets		234,184	205,016	213,923

¹	Intra-group balances are netted in calculating capital ratios.

Risk weighted assets (RWA) increased by $20 billion or 9 per cent compared to December 2009, mainly on account of Wholesale Banking, whose RWA increased by $14 billion, or 9 per cent. RWA growth was concentrated in Other Asia Pacific, Singapore, Hong Kong and the Middle East and Other South Asia (MESA). The remaining growth of $6 billion or 12 per cent was in Consumer Banking mainly in Hong Kong, Other Asia Pacific and Americas, UK and Europe.

Credit risk RWA increased by $17 billion, or 10 per cent, largely driven by Wholesale Banking of $12 billion. The growth in Wholesale Banking was driven by good levels of asset growth in Transaction Banking, Corporate Finance and Lending ($12 billion). Credit migration of $4 billion, down from the average level experienced in 2009, was offset by RWA efficiencies ($3 billion) and Portfolio Management saves of ($1 billion).

The growth in Consumer Banking credit risk RWA ($5 billion) primarily arose from strong growth in the mortgage portfolio across Other Asia Pacific, cards and SME businesses in Hong Kong, SME supply chain financing in India and Private Banking in the Americas, UK and Europe region.

Market risk RWA decreased by $3 billion, or 14 per cent as a result of reduced market risk positions in our commodities and FX businesses.

Operational risk RWA increased by $6 billion, or 30 per cent. Given that this is primarily determined by the change in income over a rolling three year time horizon, the growth reflects the strong performance of the Group over that period.

Standard Chartered PLC Condensed consolidated interim income statement For the six months ended 30 June 2010
			6 months ended	6 months ended	6 months ended
		Notes	30.06.10	30.06.09	31.12.09
		Notes	$million	$million	$million
Interest income			6,462	6,490	6,436
Interest expense			(2,307)	(2,790)	(2,513)
Net interest income			4,155	3,700	3,923
Fees and commission income			2,288	1,853	1,971
Fees and commission expense			(140)	(168)	(286)
Net trading income		3	1,351	1,740	1,150
Other operating income		4	270	835	466
Non-interest income			3,769	4,260	3,301
Operating income			7,924	7,960	7,224
Staff costs			(2,808)	(2,618)	(2,294)
Premises costs			(381)	(314)	(384)
General administrative expenses			(884)	(860)	(962)
Depreciation and amortisation		5	(271)	(235)	(285)
Operating expenses			(4,344)	(4,027)	(3,925)
Operating profit before impairment losses and taxation			3,580	3,933	3,299
Impairment losses on loans and advances and other credit risk provisions		15	(437)	(1,088)	(912)
Other impairment		6	(50)	(15)	(87)
Profit from associates			23	8	13
Profit before taxation			3,116	2,838	2,313
Taxation		7	(935)	(847)	(827)
Profit for the period			2,181	1,991	1,486


Profit attributable to:
Non-controlling interests		27	33	58	39
Parent company shareholders			2,148	1,933	1,447
Profit for the period			2,181	1,991	1,486

			cents	cents	cents
Earnings per share:
Basic earnings per ordinary share		9	103.4	98.8	69.9
Diluted earnings per ordinary share		9	101.9	98.0	69.2

Dividends per ordinary share:
Interim dividend declared		8	23.35	-	-
Interim dividend paid		8	-	21.23	-
Final dividend paid		8	-	-	44.80

			$million	$million	$million
Total dividend:
Total interim dividend payable¹			481	-	-
Total interim dividend (paid 8 October 2009)			-	425	-
Total final dividend (paid 13 May 2010)			-	-	904

¹	Dividend declared/payable represents the interim dividend as declared by the Board of Directors on 4 August 2010 and is expected to be paid on 5 October 2010. This dividend does not represent a liability to the Group at 30 June 2010 and is a non-adjusting event as defined by IAS-10 'Events after the reporting period'.

Standard Chartered PLC Condensed consolidated interim statement of comprehensive income For the six months ended 30 June 2010
			6 months ended	6 months ended	6 months ended
			30.06.10	30.06.09	31.12.09
		Notes	$million	$million	$million
Profit for the period			2,181	1,991	1,486
Other comprehensive income :
Exchange differences on translation of foreign operations:
	Net (losses)/gains taken to equity		(291)	(38)	638
Actuarial losses on retirement benefit obligations		24	(42)	(127)	(23)
Share of other comprehensive income from associates			(3)	-	19
Available-for-sale investments:
	Net valuation gains/(losses) taken to equity		479	(30)	485
	Reclassified to income		(73)	(380)	(200)
Cash flow hedges:
	Net (losses)/gains taken to equity		(36)	44	(30)
	Reclassified to income		36	69	37
Taxation relating to components of other comprehensive income			(94)	105	(43)
Other comprehensive income for the period, net of taxation			(24)	(357)	883
Total comprehensive income for the period			2,157	1,634	2,369

Total comprehensive income attributable to:
Non-controlling interests		27	48	65	46
Parent company shareholders			2,109	1,569	2,323
			2,157	1,634	2,369

Standard Chartered PLC Condensed consolidated interim balance sheet As at 30 June 2010
	Notes	30.06.10	30.06.09	31.12.09
	Notes	$million	$million	$million
Assets
Cash and balances at central banks	10, 29	29,694	12,141	18,131
Financial assets held at fair value through profit or loss	10, 11	24,287	16,450	22,446
Derivative financial instruments	10, 12	44,555	45,823	38,193
Loans and advances to banks	10, 13, 15	49,390	45,366	50,885
Loans and advances to customers	10, 14, 15	215,005	182,748	198,292
Investment securities	10, 17	76,787	72,616	75,728
Other assets	10, 19	24,771	19,653	17,201
Current tax assets		159	649	203
Prepayments and accrued income		4,072	4,274	3,241
Interests in associates		620	487	514
Goodwill and intangible assets		6,513	6,404	6,620
Property, plant and equipment		3,971	3,934	4,103
Deferred tax assets		1,003	675	1,096
Total assets		480,827	411,220	436,653

Liabilities
Deposits by banks	10, 20	31,903	33,634	38,461
Customer accounts	10, 21	279,089	230,147	251,244
Financial liabilities held at fair value through profit or loss	10, 11	18,380	16,947	14,505
Derivative financial instruments	10, 12	43,425	43,109	36,584
Debt securities in issue	10, 22	33,364	20,860	29,272
Other liabilities	10, 23	23,716	20,598	16,139
Current tax liabilities		897	592	802
Accruals and deferred income		3,572	3,493	4,113
Subordinated liabilities and other borrowed funds	10, 25	15,555	16,922	16,730
Deferred tax liabilities		179	176	193
Provisions for liabilities and charges		224	310	184
Retirement benefit obligations	24	470	542	506
Total liabilities		450,774	387,330	408,733

Equity
Share capital	26	1,037	967	1,013
Reserves		28,421	22,360	26,327
Total parent company shareholders' equity		29,458	23,327	27,340
Non-controlling interests	27	595	563	580
Total equity		30,053	23,890	27,920
Total equity and liabilities		480,827	411,220	436,653

Standard Chartered PLC Condensed consolidated interim statement of changes in equity For the six months ended 30 June 2010
		Share capital	Share premium account	Capital and capital redepmtion reserve¹	Merger reserve	Available- for-sale reserve	Cash flow hedge reserve	Translation reserve	Retained earnings	Parent company shareholders equity	Non-controlling interests	Total
		$million	$million	$million	$million	$million	$million	$million	$million	$million	$million	$million
At 1 January 2009		948	4,743	18	5,617	(5)	(83)	(1,784)	12,686	22,140	555	22,695
Profit for the period		-	-	-	-	-	-	-	1,933	1,933	58	1,991
Other comprehensive income		-	-	-	-	(316)	78	(38)	(88)²	(364)	7	(357)
Distributions		-	-	-	-	-	-	-	-	-	(54)	(54)
Shares issued, net of expenses		3	39	-	-	-	-	-	-	42	-	42
Net own shares adjustment		-	-	-	-	-	-	-	(69)	(69)	-	(69)
Share option expense, net of taxation		-	-	-	-	-	-	-	117	117	-	117
Capitalised on scrip dividend		16	(16)	-	-	-	-	-	-	-	-	-
Dividends, net of scrip		-	-	-	-	-	-	-	(472)	(472)	-	(472)
Other decreases		-	-	-	-	-	-	-	-	-	(3)	(3)
At 30 June 2009		967	4,766	18	5,617	(321)	(5)	(1,822)	14,107	23,327	563	23,890
Profit for the period		-	-	-	-	-	-	-	1,447	1,447	39	1,486
Other comprehensive income		-	-	-	-	228	20	637	(9)²	876	7	883
Distributions		-	-	-	-	-	-	-	-	-	(33)	(33)
Shares issued, net of expenses		41	67	-	1,667	-	-	-	-	1,775	-	1,775
Net own shares adjustment		-	-	-	-	-	-	-	(12)	(12)	-	(12)
Share option expense, net of taxation		-	-	-	-	-	-	-	194	194	-	194
Capitalised on scrip dividend		5	(5)	-	-	-	-	-	-	-	-	-
Dividends, net of scrip		-	-	-	-	-	-	-	(267)	(267)	-	(267)
Other increases		-	-	-	-	-	-	-	-	-	4	4
At 31 December 2009		1,013	4,828	18	7,284	(93)	15	(1,185)	15,460	27,340	580	27,920
Profit for the period		-	-	-	-	-	-	-	2,148	2,148	33	2,181
Other comprehensive income		-	-	-	-	287	(1)	(288)	(37)²	(39)	15	(24)
Distributions		-	-	-	-	-	-	-	-	-	(32)	(32)
Shares issued, net of expenses		15	519	-	-	-	-	-	-	534	-	534
Net own shares adjustment		-	-	-	-	-	-	-	(163)	(163)	-	(163)
Share option expense, net of taxation		-	-	-	-	-	-	-	115	115	-	115
Capitalised on scrip dividend		9	(9)	-	-	-	-	-	-	-	-	-
Dividends, net of scrip		-	-	-	-	-	-	-	(477)	(477)	-	(477)
Other decreases		-	-	-	-	-	-	-	-	-	(1)	(1)
At 30 June 2010		1,037	5,338	18	7,284	194	14	(1,473)	17,046	29,458	595	30,053

¹	Includes capital reserve of $5 million and capital redemption reserve of $13 million at 1 January 2009, 30 June 2009, 31 December 2009 and 30 June 2010.
²	For the period ended 30 June 2010, comprises actuarial losses, net of taxation and non-controlling interests of $(34) million (30 June 2009: $(88) million and 31 December 2009: $(28) million) and share of comprehensive income from associates of $(3) million (30 June 2009: $nil million and 31 December 2009: $19 million).

Standard Chartered PLC Condensed consolidated interim cash flow statement For the six months ended 30 June 2010
		6 months ended	6 months ended	6 months ended
	Notes	30.06.10	30.06.09 ¹	31.12.09 ¹
	Notes	$million	$million	$million
Cash flows from operating activities
Profit before taxation		3,116	2,838	2,313
Adjustments for:
Non-cash items included within income statement	28	820	405	980
Change in operating assets	28	(57,979)	10,921	(7,959)
Change in operating liabilities	28	46,115	(24,578)	13,870
Contributions to defined benefit schemes		(75)	(21)	(103)
UK and overseas taxes paid, net of refund		(798)	(567)	(643)
Net cash (used in)/from operating activities		(8,801)	(11,002)	8,458
Net cash flows from investing activities
Purchase of property, plant and equipment		(159)	(85)	(176)
Disposal of property, plant and equipment		121	52	166
Acquisition of investment in subsidiaries and associates, net of cash acquired		(228)	(45)	(23)
Purchase of investment securities		(56,589)	(58,501)	(71,238)
Disposal and maturity of investment securities		55,295	56,331	70,347
Dividends received from investment in associates		9	10	1
Net cash used in investing activities		(1,551)	(2,238)	(923)
Net cash flows from financing activities
Issue of ordinary and preference share capital, net of expenses		534	42	1,775
Purchase of own shares		(178)	(82)	(21)
Exercise of share options through ESOP		15	13	9
Interest paid on subordinated liabilities		(561)	(568)	(304)
Gross proceeds from issue of subordinated liabilities		750	1,742	321
Repayment of subordinated liabilities		(1,534)	(1,757)	(683)
Dividends paid to non-controlling interests and preference shareholders,
net of scrip		(82)	(104)	(84)
Dividends paid to ordinary shareholders, net of scrip		(427)	(422)	(216)
Net cash (used in)/from financing activities		(1,483)	(1,136)	797
Net (decrease)/increase in cash and cash equivalents		(11,835)	(14,376)	8,332
Cash and cash equivalents at beginning of the period		68,073	73,699	59,210
Effect of exchange rate movements on cash and cash equivalents		(70)	(113)	531
Cash and cash equivalents at end of the period	29	56,168	59,210	68,073
¹Amounts have been restated as explained in note 33

Standard Chartered PLC - Notes

1. Basis of preparation

The Group condensed consolidated interim financial statements consolidate those of Standard Chartered PLC (the Company) and its subsidiaries (together referred to as the Group), equity account the Group's interest in associates and proportionately consolidate interest in jointly controlled entities.

These interim financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the FSA and with IAS 34 'Interim Financial Reporting' as adopted by the European Union (EU). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at end for the year ended 31 December 2009, which were prepared in accordance with International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations as adopted by the EU.

These interim financial statements were approved by the Board of Directors on 4 August 2010.

Except as noted below, the accounting policies applied by the Group in these interim financial statements are the same as those applied by the Group in its consolidated financial statements as at, and for, the year ended 31 December 2009.

On 1 January 2010, the Group adopted prospectively IFRS 3 (revised) 'Business Combinations' and consequential amendments to IAS 27 'Consolidated and Separate Financial Statements', IAS 28 'Investment in Associates', and IAS 31 ' Interest in Joint Ventures', none of which had any material impact on the Group's interim financial statements.

IFRS 3 (revised) continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all acquisition-related costs are expensed and no longer capitalised as part of the cost of acquisition and all payments to acquire a business - including those that are contingent - are recorded at fair value at the acquisition date. Also, when a controlling interest in an entity is acquired, any previously held interest in that entity is effectively disposed of at its fair value - with any gain or loss when compared to its carrying value recognised in the income statement - and re-acquired in aggregate with the controlling stake acquired. The revised standard has also changed certain terminology with minority interests now referred to as non-controlling interests.

The amendments to IAS 27 (revised) require the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The amendments also specify the accounting when control is lost, with any remaining interest in the entity re-measured to fair value and any resulting gain or loss is recognised in profit or loss.

On 1 January 2010, the Group and Company adopted improvements to IFRS (2009), a collection of amendments to a number of IFRSs. The amendments to IFRS 2, IFRS 8, IAS 1, IAS 7, IAS 18, IAS 39 and IFRIC 16 were applied on a retrospective basis and amendments to IFRS 5, IAS 36, IAS 38 and IFRIC 9 were applied on a prospective basis. None of these amendments had a material impact on the Group's interim financial statements.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and key sources of uncertainty were the same as those applied to the consolidated financial statements as at and for the year ended 31 December 2009.

A summary of the Group's significant accounting policies will be included in the 2010 Annual Report.

2. Segmental Information

The Group is organised on a worldwide basis for management and reporting purposes into two main business segments: Consumer Banking and Wholesale Banking. The products offered by these segments are summarised under 'Income by product' below. The businesses' focus is on broadening and deepening the relationship with customers, rather than maximising a particular product line. Hence the Group evaluates segmental performance based on overall profit or loss before taxation (excluding corporate items not allocated) and not individual product profitability. Product revenue information is used as a way of assessing customer needs and trends in the market place. The strategies adopted by Consumer Banking and Wholesale Banking need to be adapted to local market and regulatory requirements, which is the responsibility of country management teams. While not the primary driver of the business, country performance is an important part of the Group's matrix structure and is also used to evaluate performance and reward staff. Corporate items not allocated are not aggregated into the businesses because of the one-off nature of these items.

The Group's entity-wide disclosure comprises geographic areas, classified by the location of the customer.

Transactions between the business segments and geographic areas are carried out on an arms length basis. Apart from the entities that have been acquired in the last two years, Group central expenses have been distributed between the business segments and geographic areas in proportion to their direct costs, and the benefit of the Group's capital has been distributed between segments in proportion to their average risk weighted assets. In the year in which an acquisition is made, the Group does not charge or allocate the benefit of the Group's capital. The distribution of central expenses is phased in over two years, based on the estimate of central management costs associated with the acquisition.

By class of business
		30.06.10					30.06.09
		Consumer Banking	Wholesale Banking	Total reportable segments	Corporate items not allocated²	Total	Consumer Banking	Wholesale Banking	Total reportable segments	Corporate items not allocated³	Total
		$million	$million	$million	$million	$million	$million	$million	$million	$million	$million
Internal income		(16)	16	-	-	-	(33)	33	-	-	-
Net interest income		1,996	2,159	4,155	-	4,155	1,902	1,798	3,700	-	3,700
Non-interest income		932	2,837	3,769	-	3,769	816	3,196	4,012	248	4,260
Operating income		2,912	5,012	7,924	-	7,924	2,685	5,027	7,712	248	7,960
Operating expenses		(1,966)	(2,357)	(4,323)	(21)	(4,344)	(1,780)	(2,247)	(4,027)	-	(4,027)
Operating profit/(loss) before impairment losses and taxation		946	2,655	3,601	(21)	3,580	905	2,780	3,685	248	3,933
Impairment losses on loans and advances and other credit risk provisions		(299)	(138)	(437)	-	(437)	(563)	(525)	(1,088)	-	(1,088)
Other impairment		(4)	(46)	(50)	-	(50)	6	(6)	-	(15)	(15)
Profit from associates		-	-	-	23	23	-	-	-	8	8
Profit before taxation		643	2,471	3,114	2	3,116	348	2,249	2,597	241	2,838
Total assets employed		110,921	368,124	479,045	1,782	480,827	93,094	316,315	409,409	1,811	411,220
Total liabilities employed		148,182	301,515	449,697	1,077	450,774	138,974	247,588	386,562	768	387,330
Other segment items:
Capital expenditure¹		108	130	238	-	238	78	559	637	-	637
Depreciation		73	85	158	-	158	86	62	148	-	148
Interests in associates		-	-	-	620	620	-	-	-	487	487
Amortisation of intangible assets		33	80	113	-	113	40	47	87	-	87

¹	Includes capital expenditure in Wholesale Banking of $nil million in respect of operating lease assets (30 June 2009: $464 million).
²	Relates to UK payroll tax and the Group's share of profit from associates.
³	Relates to gain on buy-back of subordinated debt, impairment of associates and other strategic investments and the Group's share of profit from associates.

2. Segmental Information continued

By class of business

		31.12.09
		Consumer Banking	Wholesale Banking	Total reportable segments	Corporate items not allocated²	Total
		$million	$million	$million	$million	$million
Internal income		(22)	22	-	-	-
Net interest income		1,974	1,949	3,923	-	3,923
Non-interest income		992	2,293	3,285	16	3,301
Operating income		2,944	4,264	7,208	16	7,224
Operating expenses		(1,929)	(1,938)	(3,867)	(58)	(3,925)
Operating profit/(loss) before impairment losses and taxation		1,015	2,326	3,341	(42)	3,299
Impairment losses on loans and advances and other credit risk provisions		(489)	(423)	(912)	-	(912)
Other impairment		(7)	(76)	(83)	(4)	(87)
Profit from associates		-	-	-	13	13
Profit before taxation		519	1,827	2,346	(33)	2,313
Total assets employed		103,534	331,306	434,840	1,813	436,653
Total liabilities employed		144,167	263,571	407,738	995	408,733
Other segment items:
Capital expenditure¹		82	342	424	-	424
Depreciation		75	89	164	-	164
Interests in associates		-	-	-	514	514
Amortisation of intangible assets		31	90	121	-	121

¹	Includes capital expenditure in Wholesale Banking of $167 million in respect of operating lease assets.
²	Relates to gain on buy-back of subordinated debt, UK payroll tax, impairment of associates and the Group's share of profit from associates.

The following table details entity-wide operating income by product:
	6 months ended	6 months ended	6 months ended
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Consumer Banking
Cards, Personal Loans and Unsecured Lending	988	954	1,038
Wealth Management and Deposits	1,106	1,100	1,132
Mortgage and Auto Finance	733	540	704
Other	85	91	70
Total operating income by product	2,912	2,685	2,944
Wholesale Banking
Lending and Portfolio Management	465	412	437
Transaction Banking	1,282	1,272	1,265
Global Markets
Financial Markets	1,711	2,036	1,275
Asset and Liability Management (ALM)	488	557	406
Corporate Finance	932	615	679
Principal Finance	134	135	202
Total Global Markets	3,265	3,343	2,562
Total operating income by product	5,012	5,027	4,264

2. Segmental Information continued

Entity-wide information

By geography

The Group manages its reportable business segments on a global basis. The operations are based in eight main geographic areas. The UK is the home country of the Company.

		30.06.10
		Asia Pacific
		Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe¹	Total
		$million	$million	$million	$million	$million	$million	$million	$million	$million
Internal income		24	(68)	(30)	32	187	(18)	39	(166)	-
Net interest income		580	446	583	867	401	579	251	448	4,155
Fees and commissions income, net		302	219	115	377	249	312	217	357	2,148
Net trading income		269	280	115	190	155	168	119	55	1,351
Other operating income		16	36	13	75	19	15	20	76	270
Operating income		1,191	913	796	1,541	1,011	1,056	646	770	7,924
Operating expenses		(656)	(477)	(518)	(895)	(344)	(515)	(323)	(616)	(4,344)
Operating profit before impairment losses and taxation		535	436	278	646	667	541	323	154	3,580
Impairment losses on loans and advances and other credit risk provisions		(25)	(17)	(129)	(89)	(43)	(116)	(7)	(11)	(437)
Other impairment		1	-	-	(1)	-	(25)	(5)	(20)	(50)
Profit from associates		-	-	-	23	-	-	-	-	23
Profit before taxation		511	419	149	579	624	400	311	123	3,116
Capital expenditure²		11	133	31	27	15	8	6	7	238

¹	Americas UK & Europe includes operating income of $381 million in respect of the UK, the Company's country of domicile.
²	Includes capital expenditure in Americas, UK and Europe of $nil million in respect of operating lease assets. Other capital expenditure comprises additions to property and equipment and software related intangibles including any post-acquisition additions made by the acquired entities.
		30.06.09
		Asia Pacific
		Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe¹	Total
		$million	$million	$million	$million	$million	$million	$million	$million	$million
Internal income		8	(30)	(37)	42	82	13	30	(108)	-
Net interest income		695	341	431	731	344	537	232	389	3,700
Fees and commissions income, net		225	180	98	213	337	264	165	203	1,685
Net trading income		252	240	154	281	110	234	112	357	1,740
Other operating income		43	152	59	247	31	95	19	189	835
Operating income		1,223	883	705	1,514	904	1,143	558	1,030	7,960
Operating expenses		(567)	(430)	(439)	(932)	(287)	(463)	(269)	(640)	(4,027)
Operating profit before impairment losses and taxation		656	453	266	582	617	680	289	390	3,933
Impairment losses on loans and advances and other credit risk provisions		(88)	(23)	(185)	(191)	(97)	(460)	(24)	(20)	(1,088)
Other impairment		10	-	-	14	6	-	-	(45)	(15)
(Loss)/profit from associates		(2)	-	-	11	-	-	-	(1)	8
Profit before taxation		576	430	81	416	526	220	265	324	2,838
Capital expenditure²		23	63	16	12	15	8	17	483	637

¹	Americas UK & Europe includes operating income of $584 million in respect of the UK, the Company's country of domicile.
²	Includes capital expenditure in Americas, UK and Europe of $464 million in respect of operating lease assets. Other capital expenditure comprises additions to property and equipment and software related intangibles including any post-acquisition additions made by the acquired entities.

2. Segmental Information continued
		31.12.09
		Asia Pacific
		Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe¹	Total
		$million	$million	$million	$million	$million	$million	$million	$million	$million
Internal income		6	12	(25)	1	113	(55)	9	(61)	-
Net interest income		613	441	477	774	380	597	259	382	3,923
Fees and commissions income, net		317	111	89	289	209	230	155	285	1,685
Net trading income		204	117	168	221	149	122	109	60	1,150
Other operating income		7	28	140	89	58	41	(1)	104	466
Operating income		1,147	709	849	1,374	909	935	531	770	7,224
Operating expenses		(601)	(371)	(514)	(846)	(284)	(428)	(284)	(597)	(3,925)
Operating profit before impairment losses and taxation		546	338	335	528	625	507	247	173	3,299
Impairment losses on loans and advances and other credit risk provisions		(57)	(14)	(93)	(204)	(104)	(351)	(30)	(59)	(912)
Other impairment		-	(40)	(1)	12	13	(10)	-	(61)	(87)
(Loss)/profit from associates		(3)	-	-	18	-	-	-	(2)	13
Profit before taxation		486	284	241	354	534	146	217	51	2,313
Capital expenditure²		1	101	47	20	34	11	20	190	424

¹	Americas UK & Europe includes operating income of $383 million in respect of the UK, the Company's country of domicile.
²	Includes capital expenditure in Americas, UK and Europe of $167 million in respect of operating lease assets. Other capital expenditure comprises additions to property and equipment and software related intangibles including any post-acquisition additions made by the acquired entities.

2. Segmental Information continued
Net interest margin and yield
								6 months ended		6 months ended		6 months ended
								30.06.10		30.06.09		31.12.09
								$million		$million		$million
Net interest margin (%)								2.3		2.4		2.2
Net interest yield (%)								2.1		2.3		2.1
Average interest earning assets								363,886		312,358		344,752
Average interest bearing liabilities								325,820		294,741		301,930


Net interest margin by geography
	30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa		Americas UK & Europe¹		Intra-group/ tax assets		Total
	$million	$million	$million	$million	$million	$million	$million		$million		$million		$million
Total assets employed	94,266	75,218	64,095	92,469	37,239	46,968	15,069		109,041		(53,538)		480,827
Average interest-earning assets	78,499	51,339	54,207	74,853	27,044	31,001	11,618		72,097		(36,772)		363,886
Net interest income	603	404	548	888	507	580	291		334		-		4,155
Net interest margin (%)	1.5	1.6	2.0	2.4	3.8	3.8	5.1		0.9		-		2.3
¹Americas UK & Europe includes total assets employed of $78,546 million in respect of the UK, the Company's country of domicile.

	30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa		Americas UK & Europe¹		Intra-group/ tax assets		Total
	$million	$million	$million	$million	$million	$million	$million		$million		$million		$million
Total assets employed²	87,934	59,398	61,854	78,971	29,321	43,767	13,705		87,230		(50,960)		411,220
Average interest-earning assets	74,175	40,857	44,936	69,106	21,648	26,709	10,964		61,143		(37,180)		312,358
Net interest income	692	339	394	766	377	552	262		318		-		3,700
Net interest margin (%)²	1.9	1.7	1.8	2.2	3.5	4.2	4.8		1.1		-		2.4
¹Americas UK & Europe includes total assets employed of $69,519 million in respect of the UK, the Company's country of domicile.
²Amounts have been restated as set out in note 33

	31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa		Americas UK & Europe¹		Intra-group/ tax assets		Total
	$million	$million	$million	$million	$million	$million	$million		$million		$million		$million
Total assets employed	91,739	62,137	63,222	83,191	31,719	44,275	13,633		91,149		(44,412)		436,653
Average interest-earning assets	79,591	47,239	49,521	68,034	25,418	31,747	11,121		65,399		(33,318)		344,752
Net interest income	649	403	447	773	522	562	270		297		-		3,923
Net interest margin (%)	1.6	1.7	1.8	2.3	4.1	3.5	4.8		0.9		-		2.2
¹Americas UK & Europe includes total assets employed of $76,541 million in respect of the UK, the Company's country of domicile.

2. Segmental Information continued
The following tables set out the structure of the Group's deposits by principal geographic areas as at 30 June 2010, 30 June 2009 and 31 December 2009:
	30.06.10
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Non-interest bearing current and demand accounts	5,758	5,711	162	4,851	3,716	7,761	3,210	2,753	33,922
Interest bearing current accounts and savings deposits	40,048	19,284	16,104	25,668	2,157	3,600	2,207	17,932	127,000
Time deposits	26,091	23,042	16,283	32,327	5,994	11,359	2,241	36,498	153,835
Other deposits	79	50	516	1,052	1,766	269	72	1,586	5,390
Total	71,976	48,087	33,065	63,898	13,633	22,989	7,730	58,769	320,147
Deposits by banks	2,131	1,417	3,586	6,866	466	2,323	532	15,086	32,407
Customer accounts	69,845	46,670	29,479	57,032	13,167	20,666	7,198	43,683	287,740
	71,976	48,087	33,065	63,898	13,633	22,989	7,730	58,769	320,147
Debt securities in issue	10	697	10,669	1,846	312	51	370	22,657	36,612
Total	71,986	48,784	43,734	65,744	13,945	23,040	8,100	81,426	356,759

	30.06.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Non-interest bearing current and demand accounts	4,433	3,837	69	3,382	2,204	5,874	1,867	2,575	24,241
Interest bearing current accounts and savings deposits	37,148	13,139	15,796	23,890	1,798	3,092	3,688	12,425	110,976
Time deposits	25,365	20,064	13,283	27,865	5,827	10,260	1,727	25,335	129,726
Other deposits	51	108	517	1,178	165	604	139	2,233	4,995
Total	66,997	37,148	29,665	56,315	9,994	19,830	7,421	42,568	269,938
Deposits by banks	1,961	1,755	8,591	4,532	84	1,000	523	15,520	33,966
Customer accounts	65,036	35,393	21,074	51,783	9,910	18,830	6,898	27,048	235,972
	66,997	37,148	29,665	56,315	9,994	19,830	7,421	42,568	269,938
Debt securities in issue	252	1,546	11,406	1,987	543	114	257	8,557	24,662
Total	67,249	38,694	41,071	58,302	10,537	19,944	7,678	51,125	294,600

	31.12.09
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Non-interest bearing current and demand accounts	6,220	6,343	81	4,393	2,779	6,571	2,274	1,911	30,572
Interest bearing current accounts and savings deposits	42,493	16,544	16,663	24,480	2,051	3,093	3,386	18,016	126,726
Time deposits	22,964	20,731	13,840	27,855	5,101	11,086	1,694	30,611	133,882
Other deposits	73	52	458	1,048	1,291	408	146	1,033	4,509
Total	71,750	43,670	31,042	57,776	11,222	21,158	7,500	51,571	295,689
Deposits by banks	2,898	1,972	8,287	6,673	620	1,353	294	16,846	38,943
Customer accounts	68,852	41,698	22,755	51,103	10,602	19,805	7,206	34,725	256,746
	71,750	43,670	31,042	57,776	11,222	21,158	7,500	51,571	295,689
Debt securities in issue	145	679	12,608	1,695	520	45	326	17,241	33,259
Total	71,895	44,349	43,650	59,471	11,742	21,203	7,826	68,812	328,948

3. Net trading income
		6 months ended	6 months ended	6 months ended
		30.06.10	30.06.09	31.12.09
		$million	$million	$million
Gains less losses on instruments held for trading:
Foreign currency¹		574	916	914
Trading securities		141	224	105
Interest rate derivatives		433	361	215
Credit and other derivatives		79	253	(218)
		1,227	1,754	1,016
Gains less losses from fair value hedging:
Gains less losses from fair value hedged items		(702)	511	(57)
Gains less losses from fair value hedged instruments		708	(542)	80
		6	(31)	23
Gains less losses on instruments designated at fair value:
Financial assets designated at fair value through profit or loss		168	(56)	78
Financial liabilities designated at fair value through profit or loss		(11)	42	28
Derivatives managed with financial instruments designated at fair value through profit or loss		(39)	31	5
		118	17	111
Total net trading income		1,351	1,740	1,150

¹	Includes foreign currency gains and losses arising on the translation of foreign currency monetary assets and liabilities.

4. Other operating income
	6 months ended	6 months ended	6 months ended
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Other operating income includes:
Gains less losses on available-for-sale financial assets:
On disposal	73	391	201
Write downs on asset backed securities	-	-	(4)
Dividend income	20	85	24
Gains arising on repurchase of subordinated liabilities	-	248	16
Gains arising on assets fair valued at acquisition	16	18	25
Rental income from operating lease assets	87	67	89
Profit on sale of property, plant and equipment	25	10	30
Loss on sale of businesses	-	(2)	-
Gains arising on assets fair valued at acquisition primarily relate to recoveries of fair value adjustments on loans and advances.

5. Depreciation and amortisation
	6 months ended	6 months ended	6 months ended
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Premises	57	57	62
Equipment	101	91	102
Intangibles:
Software	82	53	86
Acquired on business combinations	31	34	35
Total depreciation and amortisation	271	235	285

6. Other impairment
	6 months ended	6 months ended	6 months ended
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Impairment losses on available-for-sale financial assets
- Asset backed securities	15	23	43
- Other debt securities	-	-	8
- Equity shares	5	7	42
	20	30	93
Impairment of investment in associates	-	15	4
Other	31	2	15
	51	47	112
Recovery of impairment on disposal of equity instruments	(1)	(32)	(25)
Total other impairment	50	15	87

Recoveries of impairments of $1 million (30 June 2009: $32 million and 31 December 2009: $25 million) are in respect of private and strategic equity investments sold during the period which had impairment provisions raised against them in previous periods.

7. Taxation
Analysis of taxation charge in the period:	6 months ended	6 months ended	6 months ended
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
The charge for taxation based upon the profits for the period comprises:
Current tax:
United Kingdom corporation tax at 28 per cent (30 June 2009 and 31 December 2009: 28 per cent):
Current tax on income for the period	409	510	383
Adjustments in respect of prior periods (including double taxation relief)	2	34	364
Double taxation relief	(380)	(344)	(279)
Foreign tax:
Current tax on income for the period	821	694	615
Adjustments in respect of prior periods	17	14	34
	869	908	1,117
Deferred tax:
Origination/(reversal) of temporary differences	81	(50)	(142)
Adjustments in respect of prior periods	(15)	(11)	(148)
	66	(61)	(290)
Tax on profits on ordinary activities	935	847	827
Effective tax rate	30.0%	29.8%	35.8%

Foreign taxation includes current taxation on Hong Kong profits of $62 million (30 June 2009: $83 million, 31 December 2009: $68 million) provided at a rate of 16.5 per cent (30 June 2009 and 31 December 2009: 16.5 per cent) on the profits assessable in Hong Kong.

Deferred taxation includes origination/(reversal) of temporary differences on Hong Kong profits of $(2) million (30 June 2009: $1 million, 31 December 2009: $(49) million) provided at a rate of 16.5 per cent (30 June 2009 and 31 December 2009: 16.5 per cent) on the profits assessable in Hong Kong.

8. Dividends
	30.06.10		30.06.09		31.12.09
Ordinary equity shares	Cents per share	$million	Cents per share	$million	Cents per share	$million
Final dividend declared and paid during the period	44.80	904	42.32	801	-	-
Interim dividend declared and paid during the period	-	-	-	-	21.23	425
	44.80	904	42.32	801	21.23	425

			30.06.10	30.06.09	31.12.09
Preference shares			$million	$million	$million
Non-cumulative irredeemable preference shares:		7 ³/₈ per cent preference shares of £1 each¹	6	6	5
		8 ¹/₄ per cent preference shares of £1 each¹	7	7	6
Non-cumulative redeemable preference shares:		8.125 per cent preference shares of $5 each¹	38	38	37
		7.014 per cent preference shares of $5 each	26	26	27
		6.409 per cent preference shares of $5 each	24	24	24

¹	Dividends on these preference shares are treated as interest expense and accrued accordingly.

Dividends on ordinary equity and those preference shares classified as equity are recorded in the period in which they are declared and, in respect of the final dividend, have been approved by the shareholders. Accordingly, the final ordinary equity share dividends set out above relate to the respective prior years. The 2009 interim dividend of 21.23 cents per ordinary share ($425 million) was paid to eligible shareholders on 8 October 2009 and the final dividend of 44.80 cents per ordinary share ($904 million) was paid to eligible shareholders on 13 May 2010.

The 2010 interim dividend of 23.35 cents per share ($481 million) will be paid in either sterling, Hong Kong dollars or US dollars on 5 October 2010 to shareholders on the UK register of members at the close of business in the UK (10:00 pm London time) on 13 August 2010, and to shareholders on the Hong Kong branch register of members at the opening of business in Hong Kong (9:00 am Hong Kong time) on 13 August 2010. The 2010 interim dividend will be paid in Indian Rupees on 5 October 2010 to Indian Depository Receipt holders on the Indian register at the close of business in India on 13 August 2010.

It is intended that shareholders on the UK register and Hong Kong branch register will be able to elect to receive shares credited as fully paid instead of all or part of the final cash dividend. Details of the dividend arrangements will be sent to shareholders on or around 1 September 2010. Indian Depository Receipt holders will receive their dividend in Indian Rupees only.

9. Earnings per ordinary share
		6 months ended 30.06.10			6 months ended 30.06.09
		Profit¹	Weighted average number of shares	Per share amount	Profit¹	Weighted average number of shares	Per share amount
		$million	('000)	cents	$million	('000)	cents
Basic earnings per ordinary share		2,098	2,028,825	103.4	1,883	1,906,239	98.8
Effect of dilutive potential ordinary shares:
Options²		-	30,589	-	-	15,300	-
Diluted earnings per ordinary share		2,098	2,059,414	101.9	1,883	1,921,539	98.0

					6 months ended 31.12.09
					Profit¹	Weighted average number of shares	Per share amount
					$million	('000)	cents
Basic earnings per ordinary share					1,396	1,998,105	69.9
Effect of dilutive potential ordinary shares:
Options²					-	18,699	-
Diluted earnings per ordinary share					1,396	2,016,804	69.2

There were no ordinary shares issued after the balance sheet date that would have significantly affected the number of ordinary shares used in the above calculation had they been issued prior to the end of the balance sheet date.



The Group measures earnings per share on a normalised basis. This differs from earnings defined in IAS 33 'Earnings per share'.
The table below provides a reconciliation.
					30.06.10	30.06.09	31.12.09
					$million	$million	$million
Profit attributable to ordinary shareholders					2,098	1,883	1,396
Amortisation of intangible assets arising on business combinations					31	34	35
(Profit)/loss on sale of property, plant and equipment					(16)	(10)	10³
Gains arising on repurchase of subordinated liabilities					-	(248)	(16)
Loss on sale of businesses					-	2	-
Loss on PEM Group structured notes					-	170	-
Pre-incorporation costs of Korean principal holding company					-	5	-
UK bank payroll tax					21	-	58
Impairment of associates and other strategic investments					-	15	4
One-off settlement with the UK Tax authority⁴					-	-	190
Tax on normalised items					(5)	(41)	24
Normalised earnings					2,129	1,810	1,701
Normalised basic earnings per ordinary share (cents)					104.9	95.0	85.1
Normalised diluted earnings per ordinary share (cents)					103.4	94.2	84.3

¹	The profit amounts represent the profit attributable to ordinary shareholders, which is profit for the year after non-controlling interest and the declaration of dividends payable to the holders of the non-cumulative redeemable preference shares classified as equity (see note 8).
²	The impact of anti-dilutive options has been excluded from this amount as required by IAS 33 'Earnings Per Share'.
³	In the second half of 2009, the Group prospectively re-evaluated its definition of normalised earnings and as a consequence profits or losses on sale of Consumer Banking branches are no longer considered to be normalising items as they are not of a capital, infrequent or exceptional nature nor arise consequent to investment transactions driven by strategic intent.
⁴	This amount represents $192 million one-off tax settlement with the UK tax authority, net of interest income on tax receivables of $8 million and related tax of $6 million.

10. Financial instruments

Classification

Financial assets are classified between four measurement categories: held at fair value through profit or loss (comprising trading and designated), available-for-sale, loans and receivables and held-to-maturity; and two measurement categories for financial liabilities: held at fair value through profit or loss (comprising trading and designated) and amortised cost. Instruments are classified in the balance sheet in accordance with their legal form, except for instruments that are held for trading purposes and those that the Group has designated to hold at fair value through the profit or loss account. The latter are combined on the face of the balance sheet and disclosed as financial assets or liabilities held at fair value through profit or loss.

The Group's classification of its principal financial assets and liabilities is summarised in the table below.

	Assets at fair value				Assets at amortised cost
Assets	Trading	Derivatives held for hedging	Designated at fair value through profit or loss	Available- for-sale	Loans and receivables	Held-to- maturity	Non-financial assets	Total
Assets	$million	$million	$million	$million	$million	$million	$million	$million
Cash and balances at central banks	-	-	-	-	29,694	-	-	29,694
Financial assets held at fair value through profit or loss
Loans and advances to banks	941	-	70	-	-	-	-	1,011
Loans and advances to customers	4,208	-	142	-	-	-	-	4,350
Treasury bills and other eligible bills	5,548	-	246	-	-	-	-	5,794
Debt securities	11,630	-	122	-	-	-	-	11,752
Equity shares	663	-	717	-	-	-	-	1,380
	22,990	-	1,297	-	-	-	-	24,287
Derivative financial instruments	43,504	1,051	-	-	-	-	-	44,555
Loans and advances to banks	-	-	-	-	49,390	-	-	49,390
Loans and advances to customers	-	-	-	-	215,005	-	-	215,005
Investment securities
Treasury bills and other eligible bills	-	-	-	20,655	-	-	-	20,655
Debt securities	-	-	-	48,252	5,975	31	-	54,258
Equity shares	-	-	-	1,874	-	-	-	1,874
	-	-	-	70,781	5,975	31	-	76,787
Other assets	-	-	-	-	17,796	-	6,975	24,771
Total at 30 June 2010	66,494	1,051	1,297	70,781	317,860	31	6,975	464,489

Cash and balances at central banks	-	-	-	-	12,141	-	-	12,141
Financial assets held at fair value through profit or loss
Loans and advances to banks	905	-	5	-	-	-	-	910
Loans and advances to customers	2,010	-	194	-	-	-	-	2,204
Treasury bills and other eligible bills	3,821	-	275	-	-	-	-	4,096
Debt securities	8,236	-	240	-	-	-	-	8,476
Equity shares	305	-	459	-	-	-	-	764
	15,277	-	1,173	-	-	-	-	16,450
Derivative financial instruments	44,417	1,406	-	-	-	-	-	45,823
Loans and advances to banks	-	-	-	-	45,366	-	-	45,366
Loans and advances to customers	-	-	-	-	182,748	-	-	182,748
Investment securities
Treasury bills and other eligible bills	-	-	-	17,670	-	-	-	17,670
Debt securities	-	-	-	47,072	6,223	31	-	53,326
Equity shares	-	-	-	1,620	-	-	-	1,620
	-	-	-	66,362	6,223	31	-	72,616
Other assets	-	-	-	-	12,946	-	6,707	19,653
Total at 30 June 2009	59,694	1,406	1,173	66,362	259,424	31	6,707	394,797

10. Financial instruments continued

Classification continued

	Assets at fair value				Assets at amortised cost
Assets	Trading	Derivatives held for hedging	Designated at fair value through profit or loss	Available- for-sale	Loans and receivables	Held-to- maturity	Non-financial assets	Total
Assets	$million	$million	$million	$million	$million	$million	$million	$million
Cash and balances at central banks	-	-	-	-	18,131	-	-	18,131
Financial assets held at fair value through profit or loss
Loans and advances to banks	1,947	-	101	-	-	-	-	2,048
Loans and advances to customers	3,373	-	138	-	-	-	-	3,511
Treasury bills and other eligible bills	5,319	-	240	-	-	-	-	5,559
Debt securities	9,941	-	170	-	-	-	-	10,111
Equity shares	633	-	584	-	-	-	-	1,217
	21,213	-	1,233	-	-	-	-	22,446
Derivative financial instruments	36,858	1,335	-	-	-	-	-	38,193
Loans and advances to banks	-	-	-	-	50,885	-	-	50,885
Loans and advances to customers	-	-	-	-	198,292	-	-	198,292
Investment securities
Treasury bills and other eligible bills	-	-	-	18,958	-	-	-	18,958
Debt securities	-	-	-	48,433	6,657	31	-	55,121
Equity shares	-	-	-	1,649	-	-	-	1,649
	-	-	-	69,040	6,657	31	-	75,728
Other assets	-	-	-	-	12,237¹	-	4,964	17,201
Total at 31 December 2009	58,071	1,335	1,233	69,040	286,202	31	4,964	420,876

¹ Includes unsettled trades and other financial assets previously included within non-financial assets.

	Liabilities at fair value
Liabilities	Trading	Derivatives held for hedging	Designated at fair value through profit or loss	Amortised cost	Non-financial liabilities	Total
Liabilities	$million	$million	$million	$million	$million	$million
Financial liabilities held at fair value through profit or loss
Deposits by banks	379	-	125	-	-	504
Customer accounts	2,114	-	6,537	-	-	8,651
Debt securities in issue	1,814	-	1,434	-	-	3,248
Short positions	5,977	-	-	-	-	5,977
	10,284	-	8,096	-	-	18,380
Derivative financial instruments	42,270	1,155	-	-	-	43,425
Deposits by banks	-	-	-	31,903	-	31,903
Customer accounts	-	-	-	279,089	-	279,089
Debt securities in issue	-	-	-	33,364	-	33,364
Other liabilities	-	-	-	17,804	5,912	23,716
Subordinated liabilities and other borrowed funds	-	-	-	15,555	-	15,555
Total at 30 June 2010	52,554	1,155	8,096	377,715	5,912	445,432

10. Financial instruments continued

Classification continued

	Liabilities at fair value
Liabilities	Trading	Derivatives held for hedging	Designated at fair value through profit or loss	Amortised cost	Non-financial liabilities	Total
Liabilities	$million	$million	$million	$million	$million	$million
Financial liabilities held at fair value through profit or loss
Deposits by banks	260	-	72	-	-	332
Customer accounts	487	-	5,338	-	-	5,825
Debt securities in issue	2,659	-	1,143	-	-	3,802
Short positions	6,988	-	-	-	-	6,988
	10,394	-	6,553	-	-	16,947
Derivative financial instruments	42,662	447	-	-	-	43,109
Deposits by banks	-	-	-	33,634	-	33,634
Customer accounts	-	-	-	230,147	-	230,147
Debt securities in issue	-	-	-	20,860	-	20,860
Other liabilities	-	-	-	14,318	6,280	20,598
Subordinated liabilities and other borrowed funds	-	-	-	16,922	-	16,922
Total at 30 June 2009	53,056	447	6,553	315,881	6,280	382,217

Financial liabilities held at fair value through profit or loss
Deposits by banks	432	-	50	-	-	482
Customer accounts	1,886	-	3,616	-	-	5,502
Debt securities in issue	2,618	-	1,369	-	-	3,987
Short positions	4,534	-	-	-	-	4,534
	9,470	-	5,035	-	-	14,505
Derivative financial instruments	36,007	577	-	-	-	36,584
Deposits by banks	-	-	-	38,461	-	38,461
Customer accounts	-	-	-	251,244	-	251,244
Debt securities in issue	-	-	-	29,272	-	29,272
Other liabilities	-	-	-	11,051¹	5,088	16,139
Subordinated liabilities and other borrowed funds	-	-	-	16,730	-	16,730
Total at 31 December 2009	45,477	577	5,035	346,758	5,088	402,935

¹ Includes unsettled trades and other financial liabilities previously included within non-financial liabilities.

Valuation of financial instruments

Valuation hierarchy

The valuation hierarchy, and the types of instruments classified into each level within that hierarchy, is set out below:

	Level 1	Level 2	Level 3
Fair value determined using:	Unadjusted quoted prices in an active market for identical assets and liabilities	Valuation models with directly or indirectly market observable inputs	Valuation models using significant non-market observable inputs
Types of financial assets:	Actively traded government and agency securities Listed equities Listed derivative instruments Investments in publicly traded mutual funds with listed market prices	Corporate and other government bonds and loans Over-the-counter (OTC) derivatives Asset backed securities Private equity investments	Asset backed securities Private equity investments Highly structured OTC derivatives with unobservable parameters Corporate bonds in illiquid markets
Types of financial liabilities:	Listed derivative instruments	OTC derivatives	Highly structured OTC derivatives with unobservable parameters.

10. Financial instruments continued

Valuation hierarchy continued

The table below shows the classification of financial instruments held at fair value into the valuation hierarchy set out above as at 30 June 2010.
Assets	Level 1	Level 2	Level 3	Total
Assets	$million	$million	$million	$million
Financial instruments held at fair value through profit or loss
Loans and advances to banks	595	416	-	1,011
Loans and advances to customers	63	4,287	-	4,350
Treasury bills and other eligible bills	4,564	1,230	-	5,794
Debt securities	6,601	5,061	90	11,752
Equity shares	654	34	692	1,380
	12,477	11,028	782	24,287
Derivative financial instruments	151	44,331	73	44,555
Available-for-sale financial assets
Treasury bills and other eligible bills	18,300	2,355	-	20,655
Debt securities	18,149	29,534	569	48,252
Equity shares	480	433	961	1,874
	36,929	32,322	1,530	70,781
Total at 30 June 2010	49,557	87,681	2,385	139,623

Liabilities
Financial instruments held at fair value through profit or loss
Deposit by banks	-	504	-	504
Customer accounts	-	8,651	-	8,651
Debt securities in issue	-	3,223	25	3,248
Short positions	5,154	823	-	5,977
	5,154	13,201	25	18,380
Derivative financial instruments	85	43,242	98	43,425
Total at 30 June 2010	5,239	56,443	123	61,805
There were no significant transfers between level 1, level 2 and level 3 during the period.

10. Financial instruments continued

Valuation hierarchy continued

The table below shows the classification of financial instruments held at fair value into the valuation hierarchy set out above as at 30 June 2009.
Assets	Level 1	Level 2	Level 3	Total
Assets	$million	$million	$million	$million
Financial instruments held at fair value through profit or loss
Loans and advances to banks	427	483	-	910
Loans and advances to customers	453	1,751	-	2,204
Treasury bills and other eligible bills	3,923	173	-	4,096
Debt securities	4,170	4,089	217	8,476
Equity shares	233	88	443	764
	9,206	6,584	660	16,450
Derivative financial instruments	1,011	44,628	184	45,823
Available-for-sale financial assets
Treasury bills and other eligible bills	15,819	1,851	-	17,670
Debt securities	14,808	31,852	412	47,072
Equity shares	557	412	651	1,620
	31,184	34,115	1,063	66,362
Total at 30 June 2009	41,401	85,327	1,907	128,635

Liabilities
Financial instruments held at fair value through profit or loss
Deposit by banks	-	332	-	332
Customer accounts	-	5,825	-	5,825
Debt securities in issue	-	3,642	160	3,802
Short positions	4,576	2,412	-	6,988
	4,576	12,211	160	16,947
Derivative financial instruments	961	41,973	175	43,109
Total at 30 June 2009	5,537	54,184	335	60,056
There were no significant transfers between level 1, level 2 and level 3 during the period

10. Financial instruments continued

Valuation hierarchy continued

The table below shows the classification of financial instruments held at fair value into the valuation hierarchy set out above as at 31 December 2009.
Assets	Level 1	Level 2	Level 3	Total
Assets	$million	$million	$million	$million
Financial instruments held at fair value through profit or loss
Loans and advances to banks	372	1,676	-	2,048
Loans and advances to customers	170	3,341	-	3,511
Treasury bills and other eligible bills	4,537	1,022	-	5,559
Debt securities	5,250	4,732	129	10,111
Equity shares	604	37	576	1,217
	10,933	10,808	705	22,446
Derivative financial instruments	623	37,432	138	38,193
Available-for-sale financial assets
Treasury bills and other eligible bills	17,987¹	971	-	18,958
Debt securities	16,366	31,630	437	48,433
Equity shares	595	298	756	1,649
	34,948	32,899	1,193	69,040
Total at 31 December 2009	46,504	81,139	2,036	129,679

Liabilities
Financial instruments held at fair value through profit or loss
Deposit by banks	-	482	-	482
Customer accounts	39	5,463	-	5,502
Debt securities in issue	-	3,987	-	3,987
Short positions	4,302	232	-	4,534
	4,341	10,164	-	14,505
Derivative financial instruments	578	35,856	150	36,584
Total at 31 December 2009	4,919	46,020	150	51,089
¹Certain government securities amounting to $5,193 million were initially classified within level 2 as at 31 December 2009. These have been re-presented as level 1 as they are actively traded and market quotes are available.

Instruments carried at amortised cost
The following table summarises the carrying amounts and fair values of those financial assets and liabilities not presented on the Group's balance sheet at fair value. The fair values in the table below are stated as at the reporting dates and may be different from the actual amount that will be received/paid on the settlement or maturity of the financial instrument.
	30.06.10		30.06.09		31.12.09
	Book amount	Fair value	Book amount	Fair value	Book amount	Fair value
	$million	$million	$million	$million	$million	$million
Assets
Cash and balances at central banks	29,694	29,694	12,141	12,141	18,131	18,131
Loans and advances to banks	49,390	49,297	45,366	45,082	50,885	50,906
Loans and advances to customers	215,005	215,347	182,748	183,209	198,292	199,739
Investment securities	6,006	5,844	6,254	5,680	6,688	6,556
Other assets	17,796	17,796	12,946	12,946	12,237	12,237
Liabilities
Deposits by banks	31,903	32,102	33,634	33,407	38,461	38,169
Customer accounts	279,089	279,746	230,147	230,453	251,244	249,548
Debt securities in issue	33,364	34,591	20,860	21,543	29,272	27,261
Subordinated liabilities and other borrowed funds	15,555	15,901	16,922	15,631	16,730	16,687
Other liabilities	17,804	17,804	14,318	14,318	11,051	11,051

10. Financial instruments continued

Reclassification of financial assets

In 2008 the Group reclassified certain non-derivative financial assets classified as held for trading into the available-for-sale ('AFS') category as these were no longer considered to be held for the purpose of selling or repurchasing in the near term. At the time of transfer, the Group identified the rare circumstances permitting such a transfer as the impact of the ongoing credit crisis in financial markets, particularly from the beginning of 2008, which significantly impacted the liquidity in certain markets. The Group also reclassified certain eligible financial assets from trading and available-for-sale categories to loans and receivables where the Group had the intent and ability to hold the reclassified assets for the foreseeable future or until maturity. There were no reclassifications during the six months to 30 June 2010 or during 2009.

The following tables provide details of the remaining balance of assets reclassified during 2008 as at 30 June 2010, 30 June 2009 and 31 December 2009:

			If assets had not been reclassified, fair value gain from 1 January 2010 to 30 June 2010 which would have been recognised within
For assets reclassified:	Carrying amount at 30 June 2010	Fair value at 30 June 2010	Income	AFS reserve	Income recognised in income statement	Effective interest rate at date of reclassification
For assets reclassified:	$million	$million	$million	$million	$million	%
From trading to AFS	352	352	27¹	-	12	5.3
From trading to loans and receivables	1,972	1,847	31	-	34	5.5
From AFS to loans and receivables	1,200	1,146	-	76	10	5.6
	3,524	3,345	58	76	56
Of which asset backed securities:
reclassified to AFS	126	126	23¹	-	4
reclassified to loans and receivables	1,931	1,833	19	76	19
¹Post reclassification, the gain is recognised within the available-for-sale reserve.
			If assets had not been reclassified, fair value (loss)/gain from 1 January 2009 to 30 June 2009 which would have been recognised within
For assets reclassified:	Carrying amount at 30 June 2009	Fair value at 30 June 2009	Income	AFS reserve	Income recognised in income statement	Effective interest rate at date of reclassification
For assets reclassified:	$million	$million	$million	$million	$million	%
From trading to AFS	1,127	1,127	(56)¹	-	51	6.3
From trading to loans and receivables	2,583	2,354	25	-	40	4.6
From AFS to loans and receivables	1,498	1,206	-	(34)	7	5.2
	5,208	4,687	(31)	(34)	98
Of which asset backed securities:
reclassified to AFS	133	133	(45)¹	-	-
reclassified to loans and receivables	2,388	1,957	(61)	(34)	10
¹Post reclassification, the loss is recognised within the available-for-sale reserve.
			If assets had not been reclassified, fair value gain from 1 July 2009 to 31 December 2009 which would have been recognised within
For assets reclassified:	Carrying amount at 31 December 2009	Fair value at 31 December 2009	Income	AFS reserve	Income/ (expense) recognised in income statement	Effective interest rate at date of reclassification
For assets reclassified:	$million	$million	$million	$million	$million	%
From trading to AFS	593	593	36¹	-	(28)	6.2
From trading to loans and receivables	2,213	2,049	102	-	55	5.8
From AFS to loans and receivables	1,362	1,216	-	179	42	5.3
	4,168	3,858	138	179	69
Of which asset backed securities:
reclassified to AFS	148	148	28¹	-	(36)
reclassified to loans and receivables	2,231	2,002	82	179	66
¹Post reclassification, the gain is recognised within the available-for-sale reserve.

11. Financial instruments held at fair value through profit or loss

Financial assets held at fair value through profit or loss

Financial assets held at fair value through profit or loss comprise assets held for trading and those financial assets designated as being held at fair value through profit or loss. For certain loans and advances and debt securities with fixed rates of interest, interest rate swaps have been acquired with the intention of significantly reducing interest rate risk. Derivatives are recorded at fair value whereas loans and advances are usually recorded at amortised cost. To significantly reduce the accounting mismatch between fair value and amortised cost, these loans and advances and debt securities have been designated at fair value through profit or loss. The Group ensures the criteria under IAS 39 are met by matching the principal terms of interest rate swaps to the corresponding loans and debt securities.

Investment securities held at fair value through profit or loss
		30.06.10
		Debt Securities	Equity Shares	Treasury bills	Total
		$million	$million	$million	$million
Issued by public bodies:
	Government securities	7,412
	Other public sector securities	66
		7,478
Issued by banks:
	Certificates of deposit	114
	Other debt securities	1,063
		1,177
Issued by corporate entities and other issuers:
	Other debt securities	3,097
Total debt securities		11,752
Of which:
	Listed on a recognised UK exchange	85	-	-	85
	Listed elsewhere	5,110	687	971	6,768
	Unlisted	6,557	693	4,823	12,073
		11,752	1,380	5,794	18,926
Market value of listed securities		5,195	687	971	6,853
Trading securities subject to sale and repurchase transactions		937	-	715	1,652

		30.06.09
		Debt Securities	Equity Shares	Treasury bills	Totall
		$million	$million	$million	$million
Issued by public bodies:
	Government securities	4,124
	Other public sector securities	136
		4,260
Issued by banks:
	Certificates of deposit	618
	Other debt securities	695
		1,313
Issued by corporate entities and other issuers:
	Other debt securities	2,903
Total debt securities		8,476
Of which:
	Listed on a recognised UK exchange	195	-	-	195
	Listed elsewhere	3,418	320	550	4,288
	Unlisted	4,863	444	3,546	8,853
		8,476	764	4,096	13,336
Market value of listed securities		3,613	320	550	4,483
Trading securities subject to sale and repurchase transactions		457	-	87	544

11. Financial instruments held at fair value through profit or loss continued

Financial assets held at fair value through profit or loss continued

		31.12.09
		Debt Securities	Equity Shares	Treasury bills	Total
		$million	$million	$million	$million
Issued by public bodies:
	Government securities	5,568
	Other public sector securities	18
		5,586
Issued by banks:
	Certificates of deposit	628
	Other debt securities	968
		1,596
Issued by corporate entities and other issuers:
	Other debt securities	2,929
Total debt securities		10,111
Of which:
	Listed on a recognised UK exchange	440	-	-	440
	Listed elsewhere	4,835	604	1,516	6,955
	Unlisted	4,836	613	4,043	9,492
		10,111	1,217	5,559	16,887
Market value of listed securities		5,275	604	1,516	7,395
Trading securities subject to sale and repurchase transactions		240	-	-	240

Financial liabilities held at fair value through profit or loss

The Group designates certain financial liabilities at fair value through profit or loss where either the liabilities:

· have fixed rates of interest and interest rate swaps or other interest rate derivatives have been entered into with the intention of significantly reducing interest rate risk; or

· are exposed to foreign currency risk and derivatives have been acquired with the intention of significantly reducing exposure to market changes; or

· have been acquired to fund trading asset portfolios or assets, or where the assets and liabilities are managed, and performance evaluated, on a fair value basis for a documented risk management or investment strategy.

Derivatives are recorded at fair value whereas non-trading financial liabilities (unless designated at fair value) are recorded at amortised cost. Designation of certain liabilities at fair value through profit or loss significantly reduces the accounting mismatch between fair value and amortised cost expense recognition (a criterion of IAS 39). The Group ensures the criteria under IAS 39 are met by matching the principal terms of derivatives to the corresponding liabilities, either individually or on a portfolio basis.

12. Derivative financial instruments

Derivatives are financial instruments that derive their value in response to changes in interest rates, financial instrument prices, commodity prices, foreign exchange rates, credit risk and indices. The types of derivatives used by the Group are set out below.

All derivatives are classified as trading and recognised and subsequently measured at fair value, with all revaluation gains recognised in profit and loss (except where cash flow or net investment hedging has been achieved, in which case the effective portion of changes in fair value is recognised within reserves).

These tables analyse the notional principal amounts and the positive and negative fair values of the Group's derivative financial instruments. Notional principal amounts are the amount of principal underlying the contract at the reporting date.

The Group limits its exposure to credit losses in the event of default by entering into master netting agreements with certain market counterparties. At 30 June 2010, $19,578 million (30 June 2009: $23,684 million, 31 December 2009: $30,539 million) is available for offset as a result of such agreements which do not meet the criteria under IAS 32, to enable these exposures to be presented on a net basis in these accounts as in the ordinary course of business they are not intended to be settled net.

	30.06.10			30.06.09
Total derivatives	Notional principal amounts	Assets	Liabilities	Notional principal amounts	Assets	Liabilities
Total derivatives	$million	$million	$million	$million	$million	$million
Foreign exchange derivative contracts:
Forward foreign exchange contracts	856,789	10,458	9,346	802,304	12,422	10,218
Currency swaps and options	531,875	9,632	10,427	485,810	11,261	10,891
Exchange traded futures and options	456	-	-	920	-	-
	1,389,120	20,090	19,773	1,289,034	23,683	21,109
Interest rate derivative contracts:
Swaps	1,467,540	18,694	18,192	1,055,433	15,328	15,507
Forward rate agreements and options	271,726	2,438	2,210	188,407	3,312	3,128
Exchange traded futures and options	577,989	262	243	701,075	519	592
	2,317,255	21,394	20,645	1,944,915	19,159	19,227
Credit derivative contracts	57,093	1,291	1,336	33,294	680	643
Equity and stock index options	6,338	293	299	1,249	310	332
Commodity derivative contracts	30,372	1,487	1,372	21,684	1,991	1,798
Total derivatives	3,800,178	44,555	43,425	3,290,176	45,823	43,109

	31.12.09
Total derivatives	Notional principal amounts	Assets	Liabilities
Total derivatives	$million	$million	$million
Foreign exchange derivative contracts:
Forward foreign exchange contracts	701,502	9,052	7,920
Currency swaps and options	448,615	9,753	9,621
Exchange traded futures and options	774	-	-
	1,150,891	18,805	17,541
Interest rate derivative contracts:
Swaps	1,210,432	14,230	13,946
Forward rate agreements and options	233,769	2,498	2,472
Exchange traded futures and options	252,625	83	84
	1,696,826	16,811	16,502
Credit derivative contracts	35,133	835	845
Equity and stock index options	3,208	470	613
Commodity derivative contracts	19,066	1,272	1,083
Total derivatives	2,905,124	38,193	36,584

12. Derivative financial instruments continued

Derivatives held for hedging

The Group uses derivatives primarily to mitigate interest rate and foreign exchange risk. Hedge accounting is applied to derivatives and hedged items when the criteria under IAS 39 have been met. The table below lists the types of derivatives that the Group holds for hedge accounting.

	30.06.10			30.06.09
	Notional principal amounts	Assets	Liabilities	Notional principal amounts	Assets	Liabilities
	$million	$million	$million	$million	$million	$million
Derivatives designated as fair value hedges:
Interest rate swaps	31,518	937	1,066	26,139	1,313	210
Forward foreign exchange contracts	1,547	13	3	-	-	-
Currency swaps	2,311	37	40	-	-	-
	35,376	987	1,109	26,139	1,313	210
Derivatives designated as cash flow hedges:
Interest rate swaps	17,778	42	29	11,662	52	20
Options	1,082	21	-	888	35	-
Forward foreign exchange contracts	377	1	4	1,603	5	91
Currency swaps	467	-	1	-	-	-
	19,704	64	34	14,153	92	111
Derivatives designated as net investment hedges:
Forward foreign exchange contracts	803	-	12	1,891	1	126
Total derivatives held for hedging	55,883	1,051	1,155	42,183	1,406	447

	31.12.09
	Notional principal amounts	Assets	Liabilities
	$million	$million	$million
Derivatives designated as fair value hedges:
Interest rate swaps	29,595	1,247	440
Forward foreign exchange contracts	825	-	1
Currency swaps	607	14	9
	31,027	1,261	450
Derivatives designated as cash flow hedges:
Interest rate swaps	14,673	46	23
Options	898	23	-
Forward foreign exchange contracts	410	-	37
Currency swaps	218	-	1
	16,199	69	61
Derivatives designated as net investment hedges:
Forward foreign exchange contracts	738	5	66
Total derivatives held for hedging	47,964	1,335	577

13. Loans and advances to banks
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Loans and advances to banks	50,537	46,297	53,067
Individual impairment provision (note 15)	(134)	(16)	(132)
Portfolio impairment provision (note 15)	(2)	(5)	(2)
	50,401	46,276	52,933
Of which: loans and advances held at fair value through profit or loss (note 10)	(1,011)	(910)	(2,048)
	49,390	45,366	50,885

14. Loans and advances to customers
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Loans and advances to customers	221,946	187,545	204,530
Individual impairment provision (note 15)	(1,810)	(1,843)	(1,853)
Portfolio impairment provision (note 15)	(781)	(750)	(874)
	219,355	184,952	201,803
Of which: loans and advances held at fair value through profit or loss (note 10)	(4,350)	(2,204)	(3,511)
	215,005	182,748	198,292
Loans and advances sold subject to sale and repurchase transactions	213	48	231

The Group has transferred to third parties by way of securitisation the rights to any collections of principal and interest on customer loan assets with a face value of $3,122 million (30 June 2009: $3,756 million, 31 December 2009: $3,601 million). The Group continues to be exposed to related credit and foreign exchange risk on these assets. The Group continues to recognise these assets in addition to the proceeds and related liability of $2,691 million (30 June 2009: $3,725 million, 31 December 2009: $3,063 million) arising from the securitisations.

The Group has entered into synthetic credit default swaps for portfolio management purposes, referencing loan assets with a notional value of $18.3 billion (30 June 2009: $15.7 billion, 31 December 2009: $15.4 billion). The Group continues to hold the underlying assets referenced in the synthetic credit default swaps.

The Group has outstanding residential mortgage loans to Korea residents of $18.9 billion (30 June 2009: $17.6 billion, 31 December 2009: $20.5 billion) and Hong Kong residents of $16.8 billion (30 June 2009: $13.5 billion, 31 December 2009: $14.8 billion).

15. Impairment provisions on loans and advances
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Provisions held at beginning of period	2,861	1,981	2,614
Exchange translation differences	(14)	22	49
Amounts written off	(611)	(590)	(742)
Recoveries of acquisition fair values¹	(14)	(14)	(25)
Recoveries of amounts previously written off	104	85	106
Discount unwind	(30)	(30)	(29)
Other	(4)	75	(22)
New provisions	747	1,397	1,216
Recoveries/provisions no longer required	(312)	(312)	(306)
Net charge against profit	435	1,085	910
Provisions held at end of period	2,727	2,614	2,861

Of which:
Individual impairment provision (note 13, 14, 16)	1,944	1,859	1,985
Portfolio impairment provision (note 13, 14)	783	755	876
Provisions held at end of period	2,727	2,614	2,861
¹Relates to acquisitions completed prior to 1 January 2010.

The following table reconciles the charge for impairment provisions on loans and advances to the total impairment charge and other credit commitments:
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Net charge against profit on loans and advances:
Individual impairment charge	523	991	808
Portfolio impairment (release)/charge	(88)	94	102
	435	1,085	910
Provisions/(release) related to credit commitments	3	3	(5)
Impairment (releases)/charges relating to debt securities classified as loans and receivables	(1)	-	7
Total impairment charge and other credit risk provisions	437	1,088	912

16. Individually impaired loans and advances
	30.06.10				30.06.09
	Consumer Banking	Wholesale Banking Loans to customers	Wholesale Banking Loans to banks	Total Wholesale Bank	Consumer Banking	Wholesale Banking - Loans to customers	Wholesale Banking - Loans to banks	Total Wholesale Bank
	$million	$million	$million	$million	$million	$million	$million	$million
Individual impaired loans	997	2,822	289	3,111	1,244	2,437	98	2,535
Individual impairment provisions (note 15)	(510)	(1,300)	(134)	(1,434)	(613)	(1,230)	(16)	(1,246)
Net impaired loans	487	1,522	155	1,677	631	1,207	82	1,289
Estimated fair value of collateral held:	543	353	-	353	565	416	-	416

					31.12.09
					Consumer Banking	Wholesale Banking - Loans to customers	Wholesale Banking - Loans to banks	Total Wholesale Bank
					$million	$million	$million	$million
Individual impaired loans					1,030	2,474	286	2,760
Individual impairment provisions (note 15)					(538)	(1,315)	(132)	(1,447)
Net impaired loans					492	1,159	154	1,313
Estimated fair value of collateral held:					601	557	-	557

Collateral held as security against impaired loans primarily relates to property and equipment. Where the fair value of collateral held exceeds the outstanding loan, any excess is paid back to the customers and is not available for offset against other loans.

17. Investment securities
	30.06.10
	Debt securities
	Held-to- maturity	Available- for-sale	Loans and receivables	Equity shares	Treasury bills	Total
	$million	$million	$million	$million	$million	$million
Issued by public bodies:
Government securities	31	19,563	389
Other public sector securities	-	675	-
	31	20,238	389
Issued by banks:
Certificates of deposit	-	4,532	1,100
Other debt securities	-	15,515	1,337
	-	20,047	2,437
Issued by corporate entities and other issuers:
Other debt securities	-	7,967	3,149
Total debt securities	31	48,252	5,975
Of which:
Listed on a recognised UK exchange	-	1,470	327¹	182	-	1,979
Listed elsewhere	27	15,324	878¹	343	6,898	23,470
Unlisted	4	31,458	4,770	1,349	13,757	51,338
	31	48,252	5,975	1,874	20,655	76,787
Market value of listed securities	27	16,794	1,208	525	6,898	25,452
Investment securities sold subject to sale and repurchase transactions	-	734	16	-	688	1,438


¹	These debt securities, which are listed or registered on a recognised UK exchange or elsewhere, are in illiquid markets.

17. Investment securities continued

		30.06.09
		Debt securities
		Held-to- maturity	Available- for-sale	Loans and receivables	Equity shares	Treasury bills	Total
		$million	$million	$million	$million	$million	$million
Issued by public bodies:
Government securities		31	15,080	396
Other public sector securities		-	1,892	-
		31	16,972	396
Issued by banks:
Certificates of deposit		-	8,182	1,137
Other debt securities		-	15,835	740
		-	24,017	1,877
Issued by corporate entities and other issuers :
Other debt securities		-	6,083	3,950
Total debt securities		31	47,072	6,223
Of which:
Listed on a recognised UK exchange		-	5,599	416^1,2	70	-	6,085
Listed elsewhere		29	15,753	1,031^1,2	469	5,375	22,657
Unlisted		2	25,720	4,776²	1,081	12,295	43,874
		31	47,072	6,223	1,620	17,670	72,616
Market value of listed securities		29	21,352	1,416	539	5,375	28,711
Investment securities subject to sale and repurchase transactions		-	734	-	-	948	1,682

¹	These debt securities, which are listed or registered on a recognised UK exchange or elsewhere, are in illiquid markets.
²	Amounts have been reclassified as set out in note 33.

		31.12.09
		Debt securities
		Held-to- maturity	Available- for-sale	Loans and receivables	Equity shares	Treasury bills	Total
		$million	$million	$million	$million	$million	$million
Issued by public bodies:
Government securities		31	16,825	392
Other public sector securities		-	1,530	18
		31	18,355	410
Issued by banks:
Certificates of deposit		-	5,875	1,795
Other debt securities		-	17,445	1,852
		-	23,320	3,647
Issued by corporate entities and other issuers :
Other debt securities		-	6,758	2,600
Total debt securities		31	48,433	6,657
Of which:
Listed on a recognised UK exchange		-	5,180	374^1,2	105	-	5,659
Listed elsewhere		29	17,451	913^1,2	289	5,241	23,923
Unlisted		2	25,802	5,370	1,255	13,717	46,146
		31	48,433	6,657	1,649	18,958	75,728
Market value of listed securities		29	22,631	1,270	394	5,241	29,565
Investment securities subject to sale and repurchase transactions		-	618	-	72	547	1,237

¹	These debt securities, which are listed or registered on a recognised UK exchange or elsewhere, are in illiquid markets.
²	Amounts have been reclassified as set out in note 33.

17. Investment securities continued

The change in the carrying amount of investment securities comprised:
	6 months ended				6 months ended
	30.06.10				30.06.09
	Debt securities	Equity shares	Treasury bills	Total	Debt securities	Equity shares	Treasury bills	Total
	$million	$million	$million	$million	$million	$million	$million	$million
Balances held at beginning of period	55,121	1,649	18,958	75,728	51,036	1,593	16,713	69,342
Exchange translation differences	(329)	(15)	(386)	(730)	684	7	(34)	657
Acquisitions	-	-	-	-	-	1	-	1
Additions	36,979	213	19,397	56,589	39,234	193	19,074	58,501
Maturities and disposals	(37,847)	(48)	(17,400)	(55,295)	(37,716)	(491)	(18,124)	(56,331)
Impairment, net of recoveries on disposal	(15)	(4)	-	(19)	(26)	25	3	2
Changes in fair value (including the effect of fair value hedging)	412	79	45	536	(307)	292	(24)	(39)
Amortisation of discounts and premiums	(63)	-	41	(22)	421	-	62	483
Balances held at end of period	54,258	1,874	20,655	76,787	53,326	1,620	17,670	72,616

	6 months ended
	31.12.09
	Debt securities	Equity shares	Treasury bills	Total
	$million	$million	$million	$million
Balances held at beginning of period	53,326	1,620	17,670	72,616
Exchange translation differences	951	13	573	1,537
Acquisitions	-	-	-	-
Additions	47,478	176	23,584	71,238
Maturities and disposals	(47,141)	(316)	(22,890)	(70,347)
Impairment, net of recoveries on disposal	(55)	(17)	(3)	(75)
Changes in fair value (including the effect of fair value hedging)	336	173	(29)	480
Amortisation of discounts and premiums	226	-	53	279
Balances held at end of period	55,121	1,649	18,958	75,728

At 30 June 2010, unamortised premiums on debt securities held for investment purposes amounted to $535 million (30 June 2009: $517 million, 31 December 2009: $669 million) and unamortised discounts amounted to $499 million (30 June 2009: $713 million, 31 December 2009: $725 million). Income from listed equity shares amounted to $6 million (30 June 2009: $6 million, 31 December 2009: $6 million) and income from unlisted equity shares amounted to $14 million (30 June 2009: $79 million, 31 December 2009: $18 million).

18. Business Combinations

2010 acquisitions

On 12 April 2010, the Group acquired 100 per cent of the consumer finance business of GE Capital (Hong Kong) Limited, a Hong Kong (restricted licence) banking company.

If the acquisition had occurred on 1 January 2010, the operating income of the Group would have been approximately $7,932 million and profit before taxation would have been approximately $3,122 million.

The assets and liabilities arising from the acquisitions are as follows:
	Fair value	Acquiree's carrying amount
	$million	$million
Cash and balances at central banks	12	12
Loans and advances to customers	787	796
Intangibles other than goodwill	5	-
Deferred tax assets	1	1
Other assets	3	3
Total assets	808	812
Other liabilities	684	684
Accruals and deferred income	2	2
Total liabilities	686	686
Net assets acquired	122	126
Purchase consideration settled in cash	(124)
Cash and cash equivalents in subsidiary acquired	12
Cash outflow on acquisition	(112)
Purchase consideration:
Cash paid	124
Less: Fair value of net assets acquired	(122)
Goodwill	2
Intangible assets acquired:
Customer relationships	5
Total	5
Contribution from acquisition to 30 June 2010:
Operating income	5
Profit before taxation	3

The fair value amounts contain some provisional balances which will be finalised within 12 months of the acquisition date.

The fair value of loans to customers is $787 million. The gross contractual amount due is $801 million, of which $14 million is the best estimate of the contractual cash flows not expected to be collected.

Acquisition related costs of $1 million are included within operating expenses.

18. Business Combinations continued

2009 acquisitions

On 30 January 2009, the Group acquired 100 per cent of the share capital of Cazenove Asia Limited (subsequently renamed Standard Chartered Securities (Hong Kong) Limited), a leading Asian equity capital markets, corporate finance and institutional brokerage business.

On 30 June 2009, the Group acquired the remaining 75 per cent minority interest in First Africa, for a consideration of $13 million. Goodwill of $5 million was recognised and $5 million of customer relationship intangibles identified.

During 2009, the Group acquired a further 2 per cent interest in its subsidiary in Ghana for an additional $8 million generating goodwill of $6 million.

At 31 December 2009, under the requirements of IFRS 3 'Business Combinations', the Group was deemed to have paid contingent consideration of $41 million in respect of its 2005 acquisition of Korea First Bank (subsequently renamed SC First Bank), and consequently additional goodwill of $41 million has been recognised.

If the acquisitions had occurred on 1 January 2009, the operating income of the Group would have been approximately $15,184 million and profit before taxation would have been approximately $5,147 million

The assets and liabilities arising from the acquisition of Cazenove Asia were as follows:
	Fair value	Acquiree's carrying amount
	$million	$million
Loans and advances to banks	34	34
Investment securities	1	1
Intangibles other than goodwill	9	-
Property, plant and equipment	1	1
Other assets	45	45
Total assets	90	81
Other liabilities	39	39
Accruals and deferred income	7	7
Retirement benefit obligations	2	2
Total liabilities	48	48
Net assets acquired	42	33
Purchase consideration settled in cash	(73)
Cash and cash equivalents in subsidiary acquired	31
Cash outflow on acquisition	(42)
Purchase consideration :
Cash paid	73
Total purchase consideration	73
Less : Fair value of net assets acquired	(42)
Goodwill	31
Intangible assets acquired:
Customer relationships	9
Total	9
Contribution from acquisition to 31 December 2009:
Operating income	39
Loss before taxation	(3)

Goodwill arising on the acquisitions is attributable to the synergies expected to arise from their integration with the Group and to those intangibles which are not recognised separately, such as the acquired workforce.

19. Other assets
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Financial assets held at amortised cost (note 10)
Hong Kong SAR Government certificates of indebtedness (note 23)	3,549	3,206	3,414
Cash collateral	6,267	5,369	4,557
Acceptances and endorsements	4,355	2,712	3,080
Unsettled trades and other financial assets	3,625	1,659	1,186
	17,796	12,946	12,237
Non-financial assets
Commodities	2,627	2,051	2,763
Other assets	4,348	4,656	2,201
Total other assets	24,771	19,653	17,201
The Hong Kong SAR Government certificates of indebtedness are subordinated to the claims of other parties in respect of bank notes issued.

20. Deposits by banks
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Deposits by banks	31,903	33,634	38,461
Deposits by banks included within:
Financial liabilities held at fair value through profit or loss (note 10)	504	332	482
Total deposits by banks	32,407	33,966	38,943

21. Customer accounts
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Customer accounts	279,089	230,147	251,244
Customer accounts included within:
Financial liabilities held at fair value through profit or loss (note 10)	8,651	5,825	5,502
Total deposits by customers	287,740	235,972	256,746

22. Debt securities in issue
		30.06.10			30.06.09
		Certificates of deposit of $100,000 or more	Other debt securities in issue	Total	Certificates of deposit of $100,000 or more	Other debt securities in issue	Total
		$million	$million	$million	$million	$million	$million
Debt securities in issue		10,194	23,170	33,364	6,400	14,460	20,860
Debt securities in issue included within:
	Financial liabilities held at fair value through profit or loss (note 10)	237	3,011	3,248	348	3,454	3,802
	Total debt securities in issue	10,431	26,181	36,612	6,748	17,914	24,662

		31.12.09
		Certificates of deposit of $100,000 or more	Other debt securities in issue	Total
		$million	$million	$million
Debt securities in issue		10,611	18,661	29,272
Debt securities in issue included within:
	Financial liabilities held at fair value through profit or loss (note 10)	865	3,122	3,987
	Total debt securities in issue	11,476	21,783	33,259

23. Other liabilities
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Financial liabilities held at amortised cost (note 10)
Notes in circulation	3,549	3,206	3,414
Acceptances and endorsements	4,194	2,700	2,963
Cash collateral	2,867	2,684	2,136
Unsettled trades and other financial liabilities	7,194	5,728	2,538
	17,804	14,318	11,051
Non-financial liabilities
Cash-settled share based payments	117	37	104
Other liabilities	5,795	6,243	4,984
Total other liabilities	23,716	20,598	16,139

Hong Kong currency notes in circulation of $3,549 million (30 June 2009: $3,206 million, 31 December 2009: $3,414 million) which are secured by the government of Hong Kong SAR certificates of indebtedness of the same amount included in other assets (note 19).

24. Retirement benefit obligations
Retirement benefit obligations comprise:
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Total market value of assets	1,981	1,916	2,009
Present value of the schemes' liabilities	(2,443)	(2,445)	(2,507)
Defined benefit schemes obligation	(462)	(529)	(498)
Defined contribution schemes obligation	(8)	(13)	(8)
Net book amount	(470)	(542)	(506)

Retirement benefit charge comprises:	6 months ended	6 months ended	6 months ended
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Defined benefit schemes	47	(12)	42
Defined contribution schemes	68	48	60
Charge against profit	115	36	102

The pension cost for defined benefit schemes was:
	6 months ended 30.06.10	6 months ended 30.06.09	6 months ended 31.12.09
	$million	$million	$million
Current service cost	47	41	45
Past service cost	3	(32)	(22)
(Gain)/loss on settlements and curtailments	(10)	(23)	12
Expected return on pension scheme assets	(53)	(51)	(61)
Interest on pension scheme liabilities	60	53	68
Total charge/(credit) to profit before deduction of tax	47	(12)	42
Loss/(gain) on assets below expected return	20	(13)	(101)
Experience loss on liabilities	22	140	124
Total loss recognised directly in statement of comprehensive income before tax	42	127	23
Deferred taxation	(8)	(38)	1
Total loss after tax	34	89	24

25. Subordinated liabilities and other borrowed funds
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Subordinated liabilities and other borrowed funds	15,555	16,922	16,730

All subordinated liabilities are unsecured, unguaranteed and subordinated to the claims of other creditors including without limitation, customer deposits and deposits by banks. The Group has the right to settle these debt instruments in certain circumstances as set out in the contractual agreements.

Of the total subordinated liabilities and other borrowings, $11,354 million is at fixed interest rates (30 June 2009: $10,243 million, 31 December 2009: $11,564 million).

On 4 February 2010, Standard Chartered Bank exercised its right to redeem its $500 million subordinated floating rate notes in full on the first optional call date.

On 23 March 2010, Standard Chartered Capital Trust I, a special purpose entity of the Group, redeemed its EUR 500 million 8.16 per cent Non-Cumulative Trust Preferred Securities.

On 24 June 2010, Standard Chartered Bank (Hong Kong) Limited issued $750 million 5.875 per cent subordinated notes due June 2020.

As at 30 June 2010, Standard Chartered Bank (Taiwan) Limited had redeemed its TWD 10 billion Undated Floating Rate Notes.

26. Share capital, reserves and own shares
	Number of ordinary shares	Ordinary share capital	Preference share capital	Total
	millions	$million	$million	$million
At 1 January 2009	1,896	948	-	948
Capitalised on scrip dividend	32	16	-	16
Shares issued	6	3	-	3
At 30 June 2009	1,934	967	-	967
Capitalised on scrip dividend	9	5	-	5
Shares issued	82	41	-	41
At 31 December 2009	2,025	1,013	-	1,013
Capitalised on scrip dividend	18	9	-	9
Shares issued	30	15	-	15
At 30 June 2010	2,073	1,037	-	1,037

2010

On 11 June 2010, the Group completed the listing of Indian Depository Receipts (IDRs) on the Bombay and National stock exchanges by issuing 24,000,000 shares of the Company against 240,000,000 IDRs (at a ratio of 10 IDRs representing 1 Company share). The shares were issued at a price of Indian Rupees (INR)104 per IDR representing a 6 per cent discount to the Company's closing share price of 1637 pence on 28 May 2010, which contributed $504 million towards the Group's capital, net of expenses of $27 million. The proceeds of this listing will be used by the Group in the ordinary course of business.

On 13 May 2010, the Company issued 18,190,898 new ordinary shares instead of the 2009 final dividend.

During the six months to 30 June 2010, 5,776,547 shares were issued under employee share plans at prices between nil and 1146 pence.

2009

On 15 May 2009, the Company issued 32,270,731 new ordinary shares instead of the 2008 final dividend. On 8 October 2009 the Company issued 9,157,053 new ordinary shares instead of the 2009 interim dividend.

During 2009, 12,594,749 ordinary shares were issued under the employee share plans at prices between nil and 1088 pence.

On 4 August 2009, the Company announced a placement on issue 75,000,000 ordinary shares by way of an accelerated book build. The shares were issued at a price of 1360 pence through which the Company raised $1.7 billion net of expenses. The middle market price on 4 August 2009 was 1328 pence. The proceeds will be used in the ordinary course of business by the Group. The share issue used a cash box structure involving a Jersey subsidiary (JerseyCo) which was 89 per cent owned by the Company prior to the transaction. In return for an issue of shares by the Company to the investors, the net proceeds of the share issue were paid to JerseyCo. Pursuant to the issue of those shares, the Company acquired the remaining share capital of JerseyCo, being all of its redeemable preference shares and the 11 per cent of the ordinary shares it did not own. Under this structure merger relief applies under Section 612 of the Companies Act 2006 which provides relief from the requirements under Section 610 of the Companies Act 2006 to create a share premium account. JerseyCo then redeemed its redeemable shares in exchange for the share issue proceeds.

26. Share Capital, reserves and own shares continued

Shares of the Group held for the beneficiaries of the Group's share based payment schemes

Bedell Cristin Trustees Limited is trustee of both the 1995 Employees' Share Ownership Plan Trust (the 1995 trust), which is an employee benefit trust used in conjunction with some of the Group's employee share schemes, and of the Standard Chartered 2004 Employee Benefit Trust (the 2004 trust) which is an employee benefit trust used in conjunction with the Group's deferred bonus plan. The trustee has agreed to satisfy a number of awards made under the employee share schemes and the deferred bonus plan through the relevant employee benefit trust. As part of these arrangements Group companies fund the trust, from time to time, to enable the trustee to acquire shares to satisfy these awards. All shares have been acquired through the London Stock Exchange.

Except as disclosed, neither the Company nor any of its subsidiaries has bought, sold or redeemed any securities of the company listed on The Stock Exchange of Hong Kong Limited during the year. Details of the shares purchased and held by the trusts are set out below.

	1995 Trust			2004 Trust			Total
Number of shares	30.06.10	30.06.09	31.12.09	30.06.10	30.06.09	31.12.09	30.06.10	30.06.09	31.12.09
Shares purchased during the period	6,240,000	4,025,000	763,000	382,516	357,909	-	6,622,516	4,382,909	763,000
Market value of shares purchased ($ million)	168	78	21	10	4	-	178	82	21
Shares held at the end of period	13,209,573	6,962,766	7,589,615	523,867	498,127	498,127	13,733,440	7,460,893	8,087,742
Maximum number of shares during the period	13,509,555			524,729			14,034,284

27. Non-controlling interests
	$300m 7.267% Hybrid Tier 1 Securities	Other non-controlling interests	Total
	$million	$million	$million
At 1 January 2009	327	228	555
Income in equity attributable to non-controlling interests	-	7	7
Other profits attributable to non-controlling interests	10	48	58
Recognised income and expense	10	55	65
Distributions	(12)	(42)	(54)
Other decreases	-	(3)	(3)
At 30 June 2009	325	238	563
Income in equity attributable to non-controlling interests	-	7	7
Other profits attributable to non-controlling interests	9	30	39
Recognised income and expense	9	37	46
Distributions	(10)	(23)	(33)
Other increases	-	4	4
At 31 December 2009	324	256	580
Income in equity attributable to non-controlling interests	-	15	15
Other profits attributable to non-controlling interests	9	24	33
Recognised income and expense	9	39	48
Distributions	(12)	(20)	(32)
Other decreases	-	(1)	(1)
At 30 June 2010	321	274	595

28. Cash flow statement
Adjustment for non-cash items and other accounts
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Depreciation and amortisation	271	235	285
Gain on disposal of property, plant and equipment	(25)	(10)	(30)
Gain on disposal of investment securities and loan and receivable financial assets	(73)	(391)	(201)
Gain arising on repurchase of subordinated-liabilities	-	(248)	(16)
Writedowns of income relating to asset backed securities	-	-	4
Movement in fair value hedges on available-for-sale assets	(50)	4	2
Amortisation of discounts and premiums of investment securities	22	(483)	(279)
Pension costs for defined benefit schemes	47	(12)	42
Impairment losses on loans and advances and other credit risk provisions	437	1,088	912
Other impairment	50	15	87
Profit from associates	(23)	(8)	(13)
Loss on sale of businesses	-	2	-
Recoveries of acquisition fair values and discount unwind	(45)	(48)	(53)
Interest expense on subordinated liabilities	209	261	240
Total	820	405	980
Change in operating assets
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
(Increase)/decrease derivative financial instruments	(6,587)	23,438	8,855
Net increase in debt securities, treasury bills equity shares held at fair value through profit or loss and Hong Kong SAR Government certificates of indebtedness	(10,736)	(4,096)	(2,235)
Net increase in loans and advances to banks and customers	(32,646)	(8,127)	(13,674)
(Increase)/decrease in pre-payments and accrued income	(895)	(755)	1,041
(Increase)/decrease in other assets	(7,115)	461	(1,946)
Total	(57,979)	10,921	(7,959)
Change in operating liabilities
	30.06.10	30.06.09¹	31.12.09¹
	$million	$million	$million
Increase/(decrease) in derivative financial instruments	7,042	(24,262)	(7,679)
Net increase/(decrease) in deposits from banks, customer accounts, debt securities in issue, Hong Kong notes in circulation and short positions	29,734	(3,267)	24,665
(Decrease)/increase in accruals and deferred income	(518)	(632)	511
Increase/(decrease) in other liabilities	9,857	3,583	(3,627)
Total	46,115	(24,578)	13,870

29. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than three months maturity from the date of acquisition. Restricted balances comprise minimum balances required to be held at central banks.
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Cash and balances at central banks	29,694	12,141	18,131
Less restricted balances	(5,932)	(4,847)	(4,971)
Treasury bills and other eligible bills	7,434	9,389	7,748
Loans and advances to banks	21,458	31,425	37,127
Trading securities	3,514	11,102	10,038
Total	56,168	59,210	68,073

30. Contingent liabilities and commitments
The table below shows the contract or underlying principal amounts and risk weighted amounts of unmatured off-balance sheet transactions at the balance sheet date. The contract or underlying principal amounts indicate the volume of business outstanding and do not represent amounts at risk.
The risk weighted amounts have been calculated in accordance with the FSA guidelines implementing the Basel Accord on capital adequacy, after taking account of collateral and guarantees received.
		30.06.10	30.06.09	31.12.09
		$million	$million	$million
Contingent liabilities¹
Guarantees and irrevocable letters of credit		31,639	28,373	28,731
Other contingent liabilities		7,811	9,247	9,927
		39,450	37,620	38,658
Commitments¹
Documentary credits and short term trade-related transactions		7,556	6,152	6,695
Forward asset purchases and forward deposits placed		276	251	874
Undrawn formal standby facilities, credit lines and other commitments to lend:
One year and over		20,931	16,569	20,616
Less than one year		24,206	14,245	20,729
Unconditionally cancellable		55,659	41,497	45,344
		108,628	78,714	94,258
Risk weighted amount:
Contingent liabilities		14,555	11,856²	13,422
Commitments		9,128	7,939²	8,856

¹	Includes amounts relating to the Group's share of its joint ventures.
²	Amounts have been adjusted to present on a consistent basis, as a result of continuing refinements in Basel II. This has not had an impact on the Group's total risk weighted assets.

31. Repurchase and reverse repurchase agreements
The Group enters into collateralised reverse repurchase and repurchase agreements and securities borrowing and lending transactions. It also receives securities as collateral for commercial lending.
Balance sheet assets
	30.06.10	30.06.09	31.12.09
	Reverse repurchase agreements	Reverse repurchase agreements	Reverse repurchase agreements
	$million	$million	$million
Banks	2,773	1,083	1,192
Customers	1,998	2,492	1,603
	4,771	3,575	2,795
Under reverse repurchase and securities borrowing arrangements, the Group obtains securities on terms which permit it to repledge or resell the securities to others. Amounts on such terms are:
	30.06.10	30.06.09	31.12.09
	$million	$million	$million
Securities and collateral which can be repledged or sold (at fair value)	4,428	2,731	2,624
Thereof repledged/transferred to others for financing activities, to satisfy commitments under short sale transactions or liabilities under sale and repurchase agreements (at fair value)	199	493	1,696
Balance sheet liabilities
	30.06.10	30.06.09	31.12.09
	Repurchase agreements	Repurchase agreements	Repurchase agreements
	$million	$million	$million
Banks	2,190	1,273	1,567
Customers	904	561	380
	3,094	1,834	1,947
Collateral pledged against these liabilities is disclosed in note 11, note 14 and note 17. The terms and conditions relating to the collateral pledged typically permits the collateral to be sold or repledged, subject to the obligation to return the collateral at the end of the agreement.

32. Liquidity risk
This table analyses assets and liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date as at the balance sheet date, on a discounted basis. Contractual maturities do not necessarily reflect actual repayments or cash flow.
The Risk review on pages 48 to 49 explains the Group's risk management with respect to asset and liability management.
		30.06.10
		Three months or less	Between three months and one year	Between one year and five years	More than five years	Total
		$million	$million	$million	$million	$million
Assets
Cash and balances at central banks		23,761	-	-	5,933	29,694
Derivative financial instruments		7,694	9,654	19,117	8,090	44,555
Loans and advances to banks¹		37,843	9,903	2,124	531	50,401
Loans and advances to customers¹		65,976	33,520	53,682	66,177	219,355
Investment securities¹		20,303	32,614	31,283	11,513	95,713
Other assets		23,947	14,175	42	2,945	41,109
Total assets		179,524	99,866	106,248	95,189	480,827

Liabilities
Deposits by banks¹		27,970	3,490	817	130	32,407
Customer accounts¹		246,863	30,290	8,806	1,781	287,740
Derivative financial instruments		8,263	8,907	18,469	7,786	43,425
Debt securities in issue¹		13,683	8,430	13,084	1,415	36,612
Other liabilities¹		19,593	1,438	1,121	12,883	35,035
Subordinated liabilities and other borrowed funds		-	6	1,154	14,395	15,555
Total liabilities		316,372	52,561	43,451	38,390	450,774
Net liquidity gap		(136,848)	47,305	62,797	56,799	30,053

¹	Amounts include financial instruments held at fair value through profit or loss (see note 10).

32. Liquidity risk continued

		30.06.09
		Three months or less	Between three months and one year	Between one year and five years	More than five years	Total
		$million	$million	$million	$million	$million
Assets
Cash and balances at central banks		7,294	-	-	4,847	12,141
Derivative financial instruments		7,849	11,515	20,027	6,432	45,823
Loans and advances to banks¹		31,425	12,492	2,213	146	46,276
Loans and advances to customers¹		64,029	27,940	41,016	51,967	184,952
Investment securities¹		20,810	30,677	24,154	10,311	85,952
Other assets		10,169	661	55	25,191	36,076
Total assets		141,576	83,285	87,465	98,894	411,220

Liabilities
Deposits by banks¹		28,151	4,945	780	90	33,966
Customer accounts¹		201,518	29,133	4,240	1,081	235,972
Derivative financial instruments		9,371	9,686	18,480	5,572	43,109
Debt securities in issue¹		6,152	7,505	9,901	1,104	24,662
Other liabilities¹		17,758	2,533	734	11,674	32,699
Subordinated liabilities and other borrowed funds		94	873	864	15,091	16,922
Total liabilities		263,044	54,675	34,999	34,612	387,330
Net liquidity gap		(121,468)	28,610	52,466	64,282	23,890

¹	Amounts include financial instruments held at fair value through profit or loss (see note 10).

		31.12.09
		Three months or less	Between three months and one year	Between one year and five years	More than five years	Total
		$million	$million	$million	$million	$million
Assets
Cash and balances at central banks		13,160	-	-	4,971	18,131
Derivative financial instruments		9,891	7,508	16,207	4,587	38,193
Loans and advances to banks¹		37,127	14,182	1,289	335	52,933
Loans and advances to customers¹		63,162	34,939	44,406	59,296	201,803
Investment securities¹		18,939	30,185	32,967	10,524	92,615
Other assets		5,755	710	49	26,464	32,978
Total assets		148,034	87,524	94,918	106,177	436,653

Liabilities
Deposits by banks¹		34,721	2,967	1,140	115	38,943
Customer accounts¹		230,332	22,198	3,971	245	256,746
Derivative financial instruments		8,644	7,969	15,757	4,214	36,584
Debt securities in issue¹		11,390	9,134	11,059	1,676	33,259
Other liabilities¹		13,182	1,089	178	12,022	26,471
Subordinated liabilities and other borrowed funds		723	-	562	15,445	16,730
Total liabilities		298,992	43,357	32,667	33,717	408,733
Net liquidity gap		(150,958)	44,167	62,251	72,460	27,920

¹	Amounts include financial instruments held at fair value through profit or loss (see note 10).

33. Restatement of prior periods

Entity-wide information

By Geography

As detailed in note 50 of the 2009 Annual Report, in the second half of 2009 the Group re-aligned its geographic reporting with underlying organisational changes to better reflect asset and income distribution and management. In order to facilitate a more meaningful comparison, the amounts reported for the six months ended 30 June 2009 in the geographic information have been restated to be presented on a consistent basis with the amounts presented for the six months ended 31 December 2009.

	Reported at 30 June 2009
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Net interest margin (%)	1.8	1.3	1.6	2.1	3.3	3.1	4.7	0.4	2.4
Total assets employed	88,112	65,855	68,440	78,293	29,656	49,258	13,817	101,373	494,804

	Restatement
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Net interest margin (%)	0.1	0.4	0.2	0.1	0.2	1.1	0.1	0.7	-
Total assets employed	(178)	(6,457)	(6,586)	678	(335)	(5,491)	(112)	(14,143)	(32,624)

	Restated at 30 June 2009
	Asia Pacific
	Hong Kong	Singapore	Korea	Other Asia Pacific	India	Middle East & Other S Asia	Africa	Americas UK & Europe	Total
	$million	$million	$million	$million	$million	$million	$million	$million	$million
Net interest margin (%)	1.9	1.7	1.8	2.2	3.5	4.2	4.8	1.1	2.4
Total assets employed	87,934	59,398	61,854	78,971	29,321	43,767	13,705	87,230	462,180

Investment securities
At 30 June 2009 and 31 December 2009, the Group has reclassified certain investment securities measured as loans and receivables between those listed on a recognised UK stock exchange, those listed elsewhere and those that are unlisted. Details of the reclassification are set out below:

	30.06.09			31.12.09
	As reported	Reclassification	As restated	As reported	Reclassification	As restated
Listed on a recognised UK exchange ¹	807	(391)	416	-	374	374
Listed elsewhere ¹	2,434	(1,403)	1,031	1,287	(374)	913
Unlisted	2,982	1,794	4,776	5,370	-	5,370
Total	6,223	-	6,223	6,657	-	6,657
¹Those loans and receivables debt securities which are listed on a recognised UK exchange or elsewhere are in illiquid markets.


Cash flow statement
Interest paid on certain subordinated debt instruments previously classified within 'Net cash used in operating activities' has been reclassified in the six months ended 30 June 2009 and 31 December 2009 to 'Net cash used in financing activities'. Details of the reclassification are set out below:
	6 months ended 30.06.09			6 months ended 31.12.09
	As reported	Reclassification	As restated	As reported	Reclassification	As restated
Change in operating liabilities	(24,872)	294	(24,578)	13,653	217	13,870
Net cash (used in)/from operating activities	(11,296)	294	(11,002)	8,241	217	8,458
Interest paid on subordinated liabilities	(274)	(294)	(568)	(87)	(217)	(304)
Net cash (used in)/from financing activities	(842)	(294)	(1,136)	1,014	(217)	797

34. Special purpose entities
The Group uses Special Purpose Entities (SPEs) in the normal course of business across a variety of activities. SPEs are established for specific limited purposes and take a number of legal forms. The main types of activities for which the Group utilises SPEs cover synthetic credit default swaps for portfolio management purposes, managed investment funds (including specialised principal finance funds) and structured finance.
SPEs are consolidated into the Group's financial statements where the Group bears the majority of the residual risk or reward. Most of the Group's consolidated SPEs are in respect of the Group's securitised portfolios of residential mortgages (see note 14).
The total assets of unconsolidated SPEs in which the Group has an interest are set out below.
		30.06.10		30.06.09		31.12.09
		Total assets	Maximum exposure	Total assets	Maximum exposure	Total assets	Maximum exposure
		$million	$million	$million	$million	$million	$million
Portfolio management vehicles		1,970	305	1,694	249	1,694	339
Principal Finance Funds¹		988	130	931	170	988	130
Structured Finance		932	590	-	-	-	-
Total		3,890	1,025	2,625	419	2,682	469

¹	Committed capital for these funds is $375 million (30 June 2009 and 31 December 2009: $375 million) of which $130 million (30 June 2009: $170 million; 31 December 2009: $130 million) have been drawn down net of provisions for impairment of $nil million (30 June 2009: $nil million; 31 December 2009: $33million).

For the purposes of portfolio management, the Group has entered into synthetic credit default swaps with note-issuing SPEs. The referenced assets remain on the Group's balance sheet as the credit risk is not transferred to these SPEs. The Group's exposure arises from (a) the capitalised start-up costs in respect of the swap vehicles and (b) interest in the first loss notes and investment in a minimal portion of the mezzanine and senior rated notes issued by the note issuing SPEs. The proceeds of the notes issuance are typically invested in AAA-rated Government securities, which are used to collateralise the SPE's swap obligations to the Group, and to repay the principal to investors at maturity. The SPEs reimburse the Group on actual losses incurred, through the realisation of the collateral security. Correspondingly, the SPEs write down the notes issued by an equal amount of the losses incurred, in reverse order of seniority. All the funding is committed for the life of these vehicles and hence the Group has no indirect exposure in respect of the vehicles' liquidity position.

The Group's exposure to Principal Finance Funds represents committed or invested capital in unleveraged investment funds, primarily investing in pan-Asian infrastructure and real estate.

Structured finance comprises interests in transactions that the Group or, more usually, a customer has structured, using one ore more SPEs, which provide beneficial arrangements for customers. The Group's exposure primarily represents the provision of funding to these structures as a financial intermediary, for which it receives a lender's return.

The Group has reputational risk in respect of certain portfolio management vehicles and investment funds either because the Group is the arranger and lead manager or because the SPEs have Standard Chartered branding.

35. Related party transactions

Directors, connected persons or officers

There were no material transactions, arrangements or agreements outstanding for any director, connected person or officer of the Company which have to be disclosed under the Act, the rules of the UK Listing Authority or the HK Listing Rules.

Associates

The Group has loans and advances to Merchant Solutions totalling $27 million at 30 June 2010 (30 June 2009: $20 million; 31 December 2009: $32 million) and deposits of $12 million (30 June 2009: $nil million and 31 December 2009: $nil million). The Group has loans and advances to China Bohai Bank of $5 million at 30 June 2010 (30 June 2009: $nil million and 31 December 2009:$nil million) and deposits of $1 million (30 June 2009: $nil million and 31 December 2009: $nil million). During the period China Bohai Bank undertook a rights issue to which the Group subscribed, increasing its investment by $102 million.

Except as disclosed, the Group did not have any other amounts due to or from associate investments.

Joint ventures

The Group has loans and advances to PT Bank Permata Tbk totalling $6 million at 30 June 2010 (30 June 2009: $12 million; 31 December 2009: $3 million), and deposits of $6 million (30 June 2009: $22 million; 31 December 2009: $16 million).

The Group has an investment in subordinated debt issued by PT Bank Permata Tbk of $127 million (30 June 2009 and 31 December 2009: $50 million).

The Group has loans and advances with Standard Chartered STCI Capital Markets totalling $12 million (30 June 2009: $nil million and 31 December 2009: $12 million).

36. Post balance sheet events

On 4 August 2010, the Directors declared an interim dividend of 23.35 cents per share.

On 22 June 2010, the UK government announced its intention to propose Parliament to reduce the UK corporation tax rate from 28 per cent to 27 per cent in 2011-12, with further reductions to 26 per cent in 2012-13, 25 per cent in 2013-14 and 24 per cent in 2014-15.

As of 30 June 2010, the tax rate changes were not substantively enacted. Had the 2011-12 or 2011-15 change of nominal tax rates been substantively enacted as of the said date, the UK deferred tax asset for 2010 would have reduced by approximately $14 million (2011-12) or $22million (2011-15).

The UK Government also announced on 22 June 2010 that it would introduce a bank levy from 1 January 2011 and has subsequently published a consultation document outlining its proposals. These would raise a levy of 0.04 per cent (0.07 per cent after 2011) on the Group's total liabilities, after deducting Tier 1 capital, insured retail deposits and repos secured on sovereign debt, with a lower rate of half the main rate applied to longer maturity wholesale funding. The proposals are open for consultation until 5 October 2010. At this time it is not certain on what basis the levy will eventually be raised. Draft legislation for inclusion in the 2011 Finance Bill will be published towards the end of 2010. The 2011 Finance Bill is expected to be enacted by late July 2011.

On 8 July 2010 the UK government announced a change to minimum statutory pension increases both in deferment and in payment. The impact on individual pension schemes depends on the nature of existing pension increases as defined in governing documentation. The Bank is currently reviewing the impact on the UK Fund with the Trustees and legal advisers. Until such time as that review is complete, expected to be in the second half of 2010, it is not possible to estimate the precise impact.

On 12 July 2010, the Group announced the acquisition of GE Commercial Financing in Singapore. The transaction was completed on 2 August 2010. The disclosures required by IFRS 3 have not been provided as the acquisition is not material.

37 Statutory accounts

The information in this half year report is unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. This document was approved by the Board on 4 August 2010. The statutory accounts for the year ended 31 December 2009 have been reported on by the Company's auditors and delivered to the Registrar of Companies in England Wales. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 of the Companies Act 2006.

38. Corporate governance

The directors confirm that, throughout the period, the Company has complied with the provisions of Appendix 14 of the Listing Rules of the Hong Kong Stock Exchange Limited (HK Listing Rules). The directors also confirm that the announcement of these results has been reviewed by the Company's Audit Committee.

The Company confirms that it has adopted a code of conduct regarding securities transactions by directors on terms no less exacting than required by Appendix 10 of the Listing Rules of the Hong Kong Stock Exchange, and that the directors of the Company have complied with this code of conduct throughout the period.

39. UK and Hong Kong accounting requirements

As required by the HK Listing Rules, an explanation of the differences in accounting practices between EU endorsed IFRS and Hong Kong Financial Reporting Standards is required to be disclosed. There would be no significant differences had these accounts been prepared in accordance with Hong Kong Financial Reporting Standards. EU endorsed IFRS may differ from IFRSs published by the International Accounting Standards Board if a standard has not been endorsed by the EU.

Standard Chartered PLC - Statement of directors' responsibilities

The directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union (EU) and that the interim management report includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7 and 4.2.8, namely:

(a) an indication of important events that have occurred during the first six months and their impact on the condensed Interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(b) material related party transactions in the first six months ended 30 June 2010 and any material changes in the related party transactions described in the last annual report of the Group.

By order of the Board

R H Meddings

Group Finance Director

4 August 2010

Independent review report by KPMG Audit Plc to Standard Chartered PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six-months ended 30 June 2010 set out on pages 53 to 97, which comprises the condensed consolidated interim balance sheet, the condensed consolidated interim income statement, the condensed consolidated interim statement of comprehensive income, the condensed consolidated interim statement of changes in equity, the condensed consolidated interim cash flow statement, and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules (the DTR) of the UK's Financial Services Authority (the UK FSA). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Review work performed

We conducted our review in accordance with the International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Review conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material aspects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

John E Hughes

for and on behalf of KPMG Audit Plc

Chartered Accountants

London

4 August 2010

Standard Chartered PLC - Additional information

A. Remuneration

The Group employed 80,799 staff at 30 June 2010 (30 June 2009: 76,466¹, 31 December 2009: 77,326).

Within the authority delegated by the board of directors, the Board Remuneration Committee is involved in determining the remuneration policy of the Group and specifically for agreeing the individual remuneration packages for executive directors and other highly remunerated individuals. No executive directors are involved in deciding their own remuneration. The Group's remuneration policy is to:

· Support a strong performance-oriented culture and ensure that individual rewards and incentives relate directly to the performance of the individual, the operations and functions for which they are responsible, the Group as a whole and the interests of the shareholders; and

· Maintain competitive reward that reflects the international nature of the Group and enable it to attract and retain talented employees of the highest quality internationally.

The Committee reviews the reward policy on a regular basis against significant regulatory developments, market practice and shareholder expectations. A 'One Bank' philosophy is central to the Group's remuneration policy and means that the approach to reward and performance management is consistent across all employees. We reward not only 'what' is achieved but 'how' it is achieved. Our distinctive culture and the importance we place on our values both play an important role in compensation decision-making, and in our robust 'pay for sustained performance' culture. Effective risk management is central to how we perform and the risk profile of various businesses is also taken into account in compensation decisions. Our approach to performance and reward is designed to drive sustainable performance, ensuring that remuneration policies support our business strategy.

The success of the Group depends upon the performance and commitment of talented employees. Individual reward and incentives therefore relate directly to an individual employee's performance (including adherence to the Group's values), to the business unit in which they operate and also to the Group's overall performance. Target total compensation is benchmarked to the relevant market in which each individual is employed, while the potential total compensation is set at upper quartile or higher for excellent individual and business performance.

The Group believes strongly in encouraging employee share ownership at all levels in the organisation. The Group operates certain share plans including the Performance Share Plan where awards are only exercisable upon the achievement of tough performance criteria. There is also a Group-wide deferral framework, under which a portion of annual performance awards might be delivered in restricted shares over a three year period.

¹The period end number of employees for 30 June 2009 has been restated to primarily reflect the inclusion of fixed-term contract workers as employees in line with

the definition under the Companies Act 2006.

B. Share awards

2000 Executive Share Option Scheme (2000 ESOS)

No share awards were granted during 2009.

A reconciliation of option movements over the period to 30 June 2010 is shown below:

	2010
	No. of shares	Weighted average exercise price
Outstanding at 1 January	3,403,965	£7.29
Lapsed	-	-
Exercised	(1,383,783)	£7.42
Outstanding at 30 June	2,020,182	£7.20
Exercisable at 30 June	2,020,182	£7.20

	2010
Range of exercise price for options outstanding	Weighted average exercise price	Weighted average remaining contractual life
£6.04/£9.10	7.20	3.0 years

The weighted average share price at the time the options were exercised during the current period was £17.23.

2001 Performance Share Plan (2001 PSP)

A reconciliation of option movements over the period to 30 June 2010 is shown below:

	2010
	No. of shares	Weighted average exercise price
Outstanding at 1 January	10,775,552	-
Granted	1,272,987	-
Lapsed	(753,071)	-
Exercised	(1,649,308)	-
Outstanding at 30 June	9,646,160	-
Exercisable at 30 June	930,011	-

	2010
Range of exercise price for options outstanding	Weighted average exercise price	Weighted average remaining contractual life
n/a	-	8.3 years

The weighted average share price at the time the options were exercised during the current period was £17.45.

1997/2006 Restricted Share Scheme (1997/2006 RSS)

A reconciliation of option movements over the period to 30 June 2010 is shown below:

	2010
	No. of shares	Weighted average exercise price
Outstanding at 1 January	17,277,162	-
Granted	9,507,385	-
Lapsed	(518,100)	-
Exercised	(1,737,271)	-
Outstanding at 30 June	24,529,176	-
Exercisable at 30 June	2,195,959	-

	2010
Range of exercise price for options outstanding	Weighted average exercise price	Weighted average remaining contractual life
n/a	-	5.9 years

The weighted average share price at the time the options were exercised during the current period was £17.46.

2007 Supplementary Restricted Share Scheme (2007 SRSS)

A reconciliation of option movements over the period to 30 June 2010 is shown below:

	2010
	No. of shares	Weighted average exercise price
Outstanding at 1 January	7,414,532	-
Granted	6,594,095	-
Lapsed	(181,693)	-
Exercised	(623,528)	-
Outstanding at 30 June	13,203,406	-
Exercisable at 30 June	341,735	-

	2010
Range of exercise price for options outstanding	Weighted average exercise price	Weighted average remaining contractual life
n/a	-	6.1 years

The weighted average share price when the options were exercised was £17.64.

1994/1996 UK and International Sharesave Scheme

A reconciliation of option movements over the period to 30 June 2010 is shown below.

	2010
	No. of shares	Weighted average exercise price
Outstanding at 1 January	35,920	£5.61
Lapsed	(35,920)	£5.61
Exercised	-	-
Outstanding at 30 June	-	-
Exercisable at 30 June	-	-

	2010
Range of exercise price for options outstanding	Weighted average exercise price	Weighted average remaining contractual life
n/a	-	-

2008 Irish Sharesave Scheme

The first awards under this scheme were made on 29 September 2008.

	2010
	No. of shares	Weighted average exercise price
Outstanding at 1 January	18,871	£10.48
Granted	-	-
Lapsed	-	-
Exercised	-	-
Outstanding at 30 June	18,871	£10.48
Exercisable at 30 June	-	-

	2010
Range of exercise price for options outstanding	Weighted average exercise price	Weighted average remaining contractual life
£10.18/£11.46	£10.48	3.1 years

2004 UK and International Sharesave Schemes

A reconciliation of option movements over the current period to 30 June 2010 is shown below:

	2010
	No. of shares	Weighted average exercise price
Outstanding at 1 January	17,466,437	£10.28
Granted	-	-
Lapsed	(1,935,561)	£9.21
Exercised	(1,006,185)	£9.13
Outstanding at 30 June	14,524,691	£10.50
Exercisable at 30 June	300,521	£9.37

	2010
Range of exercise price for options outstanding	Weighted average exercise price	Weighted average remaining contractual life
£6.51/£11.46	£10.50	2.0 years

The weighted average share price at the time the options were exercised during the current period was £16.84 for the UK Sharesave scheme and £17.13 for the International Sharesave scheme.

2004 Deferred Bonus Plan

A reconciliation of share movements over the current period to 30 June 2010 is shown below:

				2010 No. of shares
Outstanding at 1 January				350,581
Shares vested				(356,776)
Shares awarded				378,569
Shares lapsed				-
Outstanding at 30 June				372,374

Notes:

a) The market value of shares on the date of award (9 March 2010) was £17.19.

b) The shares vest one year after the date of award.

c) A notional scrip dividend accrues on the shares held in the Trust. The dividend is normally delivered in the form of shares and is released on vesting.

Valuation of options

Details of the valuation models used in determining the fair values of options granted are detailed in the Group's 2009 Annual Report and Accounts.

C. Directors' interests in ordinary shares

Director	At 1 January 2010¹ Total interests	Personal interests	Family interests	At 30 June 2010² Total interests
J W Peace	6,648	6,648	-	6,648
P A Sands	321,532	241,532	-	241,532
S P Bertamini	41,133	41,834	-	41,834
J S Bindra	130,279	130,279	-	130,279
R Delbridge	-	3,021	-	3,021
J F T Dundas	2,792	2,792	-	2,792
V F Gooding	2,804	2,804	-	2,804
Dr Han Seung-soo KBE	-	2,000	-	2,000
S J Lowth	-	2,157	-	2,157
R H P Markham	3,462	3,521	-	3,521
R Markland	3,135	3,188	-	3,188
R H Meddings	183,611	120,000	-	120,000
J G H Paynter	5,000	5,000	-	5,000
A M G Rees	160,297	120,297	-	120,297
P D Skinner	8,565	10,198	-	10,198
O H J Stocken	15,820	15,925	-	15,925
G R Bullock	120,000	80,000	-	80,000

¹ or at date of appointment to the Board, if later.

² or at date of resignation from the Board, if earlier.

The beneficial interests of directors and their families in the ordinary shares of the Company are set out above. The directors do not have any non-beneficial interests in the Company's shares.

Gareth Bullock resigned from the Board with effect from 1 May 2010.

No director had an interest in the Company's preference shares or loan stock, nor the shares or loan stocks of any subsidiary or associated undertaking of the Group.

No director had any corporate interests in the Company's ordinary shares.

2004 Deferred Bonus Plan

Director	Shares held in trust at 1 January 2010¹	Shares awarded during the period⁽¹⁾	Shares awarded in respect of notional dividend	Shares vested during the period⁽¹⁾	Shares held in trust at 30 June 2010²
P A Sands	70,532	63,675	656	71,188	63,675
S P Bertamini	170,081	27,858	1,583	171,664	27,858
G R Bullock	28,283	12,187	263	28,546	12,187
R H Meddings	35,923	43,777	334	36,257	43,777
A M G Rees	47,814	218,885	445	48,259	218,885
J S Bindra	-	12,187	-	-	12,187

¹ or at date of appointment to the Board, if later.

² or date of resignation from Board if earlier.

Notes

(1) Market value on the date of award (9 March 2010) was 1718.88 pence.

Deferred Bonus Plan

Under the 2004 Deferred Bonus Plan, shares are conditionally awarded instead of all or part of the executive directors' and certain senior executives' annual performance award. The shares are held in an employee benefit trust and automatically vest one year after the date of acquisition. No exercise is necessary. A notional scrip dividend accrues on the shares held in the trust. The dividend is delivered in the form of shares and is released on vesting.

Long term incentives - Share options

Director	Scheme	Grant date	As at 1 January 2010¹	Exercise price (pence)	Exercised	Lapsed	At 30 June 2010²	Period of exercise
P A Sands	Sharesave	26 September 2007	1,543	1088.03	-	-	1,543	2012-2013
S P Bertamini	Sharesave	9 October 2009	1,356	1146.00	-	-	1,356	2014-2015
J S Bindra	Sharesave	9 October 2009	1,356	1146.00	-	-	1,356	2014-2015
G R Bullock	Sharesave	29 September 2008	943	1017.12	-	943⁽²⁾	-	2011-2012
A M G Rees	ESOS	9 March 2005	61,768	818.86	61,768⁽¹⁾	-	-	-

¹ or at date of appointment to the Board or date of grant, if later.

² or at date of resignation from the Board if earlier.

(1) Market value on the date of exercise (9 March 2010) was 1718.88 pence.

(2) Withdrawn from scheme on 1 March 2010 and options have lapsed

2000 Executive Share Option Scheme (2000 ESOS)

It is proposed that no further awards will be made under the 2000 ESOS. However, the scheme will be retained for use in exceptional circumstances or if there is a subsequent change in policy in response to future market trends. Under the 2000 ESOS, options to acquire the Company's ordinary shares are exercisable after the third, but before the tenth, anniversary of the date of grant. The exercise price per share is the share price at the date of grant and options can normally only be exercised if a performance condition is satisfied.

All Employee Sharesave (Sharesave)

Sharesave comprises all employee share schemes in which staff across the Group, including the executive directors, are eligible to participate. The Group has operated UK and International Sharesave schemes since 1984 and 1996 respectively; the latter being specifically launched to allow all non UK based employees to participate. In 2008, the Company introduced an Irish Sharesave Scheme for employees.

Under Sharesave, employees are invited to open a three-year or a five-year savings contract. Within a period of six months after the third or fifth anniversary, employees may purchase ordinary shares in the Company at a price which is at a discount of up to 20 per cent on the share price at the date of invitation. There are no performance conditions attached to options granted under all the employee Sharesave schemes.

Long term incentives - Shares

Director	Scheme	Grant date	As at 1 January 2010¹	Exercised	Lapsed	As at 30 June 2010²	Period of exercise
J W Peace	RSS	28 September 2009	41,528	-	-	41,528	2011-2016
P A Sands	PSP	12 March 2007	162,389	125,818⁽³⁾	36,571⁽⁴⁾	-	-
	PSP	11 March 2008	184,774	-	-	184,774	2011-2018
	PSP	11 March 2009	356,481	-	-	356,481	2012-2019
	PSP	11 March 2010⁽¹⁾	186,781	-	-	186,781	2013-2020
	Deferred RSS	11 March 2009	84,231	-	-	84,231	2011-2016
	Deferred RSS	11 March 2010⁽¹⁾	59,443	-	-	59,443	2012-2019
S P Bertamini	PSP	16 September 2008	59,337	-	-	59,337	2011-2018
	PSP	11 March 2009	159,033	-	-	159,033	2012-2019
	PSP	11 March 2010⁽¹⁾	100,574	-	-	100,574	2013-2020
	Deferred RSS	11 March 2009	28,437	-	-	28,437	2011-2016
	Deferred RSS	11 March 2010⁽¹⁾	26,006	-	-	26,006	2012-2017
J S Bindra	PSP	12 March 2007	55,113	42,701⁽³⁾	12,412⁽⁴⁾	-	-
	PSP	11 March 2008	72,589	-	-	72,589	2011-2018
	PSP	11 March 2009	127,314	-	-	127,314	2012-2019
	PSP	11 March 2010⁽¹⁾	86,206	-	-	86,206	2013-2020
	Deferred RSS	11 March 2009	30,621	-	-	30,621	2011-2016
	Deferred RSS	11 March 2010⁽¹⁾	26,006	-	-	26,006	2012-2017
G R Bullock	PSP	12 March 2007	93,102	72,135⁽³⁾	20,967⁽⁴⁾	-	-
	PSP	11 March 2008	108,665	-	-	108,665	2011-2018
	PSP	11 March 2009	146,604	-	-	146,604	2012-2019
	Deferred RSS	11 March 2009	31,292	-	-	31,292	2011-2016
	Deferred RSS	11 March 2010⁽¹⁾	26,006	-	-	26,006	2012-2017
R H Meddings	PSP	12 March 2007	100,385	77,778⁽³⁾	22,607⁽⁽⁴⁾	-	-
	PSP	11 March 2008	125,646	-	-	125,646	2011-2018
	PSP	11 March 2009	220,370	-	-	220,370	2012-2019
	PSP	11 March 2010⁽¹⁾	114,942	-	-	114,942	2013-2020
	Deferred RSS	11 March 2009	53,514	-	-	53,514	2011-2016
	Deferred RSS	11 March 2010⁽¹⁾	40,867	-	-	40,867	2012-2017
A M G Rees	PSP	12 March 2007	55,113	42,701⁽³⁾	12,412⁽⁴⁾	-	-
	PSP	11 March 2008	55,432	-	-	55,432	2011-2018
	PSP	11 March 2009	123,456	-	-	123,456	2012-2019
	PSP	11 March 2010⁽¹⁾	137,931	-	-	137,931	2013-2020
	RSS	12 March 2007	27,557	27,557⁽²⁾	-	-	-
	SRSS	11 March 2008	126,701	63,350⁽²⁾	-	63,351	2011-2015
	Deferred RSS	11 March 2009	86,419	-	-	86,419	2011-2016
	Deferred SRSS	11 March 2009	288,939	-	-	288,939	2010-2016
	Deferred RSS	11 March 2010⁽¹⁾	68,965	-	-	68,965	2012-2017

¹ or at date of appointment to the Board or date of grant if later.

² or at date of resignation from the Board, if earlier.

Notes

(1) Market value on the date of award (10 March 2010) was 1740 pence

(2) Market value on the date of exercise (12 March 2010) was 1737.43 pence

(3) Market value on the date of exercise (15 March 2010) was 1735.93 pence

(4) The performance conditions were partially met for those PSP awards granted in March 2007. Therefore the number of shares lapsed indicates the portion of the award which did not satisfy the performance conditions.

2001 Performance Share Plan (2001 PSP)

Under the 2001 PSP awards of nil price options to acquire shares are granted to the director and will normally be exercised between three and ten years after the date of grant.

Before any award can be exercised under the 2001 PSP, certain performance conditions need to be met. The performance conditions are set at the time of the award. 50 per cent of each award is subject to the satisfaction of a relative total shareholder return performance target. The remaining 50 per cent of the award is subject to the satisfaction of an EPS performance target.

Restricted Share Scheme (RSS) / Supplementary Restricted Share Scheme (SRSS)

The RSS is used as a vehicle for deferring part of the annual performance awards for certain employees and as an incentive plan to motivate and retain high performing staff at any level of the organisation. Except where used for deferral purposes, executive directors are not generally eligible to participate in the RSS. Generally half of the award vests two years after the date of grant and the balance after three years. However, the deferred element of the 2009 annual performance award (granted in March 2010) will vest in three equal tranches over one, two and three years with the RSS used wherever possible for the portion of the award vesting after two and three years. There are no performance conditions attached to awards under the Restricted Share Scheme.

Further details of the share schemes mentioned above, can be found in the Company's 2009 Annual Report, which is available on the Company's website: http://investors.standardchartered.com

D. Share price information

The middle market price of an ordinary share at the close of business on 30 June 2010 was 1641 pence. The share price range during the first half of 2010 was 1403 pence to 1846 pence (based on the closing middle market prices).

E. Substantial shareholders

The Company and its shareholders have been granted partial exemption from the disclosure requirements under Part XV of the Securities and Futures Ordinance (SFO).

As a result of this exemption, shareholders no longer have an obligation under the SFO to notify the Company of substantial shareholding interests, and the Company is no longer required to maintain a register of interests of substantial shareholders under section 336 of the SFO. The Company is, however, required to file with the Hong Kong Stock Exchange any disclosure of interests made in the UK.

F. Transactions with associates of Temasek

We refer to the announcement by the Company dated 25 March 2010 and the Notice of Annual General Meeting 2010 in relation to continuing connected transactions with Temasek and its associates. In particular, we refer to the waiver granted by the Hong Kong Stock Exchange from strict compliance with the reporting and annual review requirements of the Hong Kong Listing Rules in respect of Ongoing Banking Transactions with Temasek associates that the Company has not been able to identify. In the announcement and Notice of AGM, we explained that the Company will endeavour to identify Temasek associates utilising a number of sources. In light of certain changes to the Hong Kong Listing Rules which came into effect on 3 June 2010, we wish to inform shareholders that we will no longer be maintaining a list of Temasek associates.

One of the most significant recent changes to the Hong Kong Listing Rules from the Company's perspective was the introduction on 3 June 2010 of a new exemption from the connected transaction and continuing connected transaction requirements for "transactions with associates of a passive investor" (Rules 14A.31(10) and 14A.33(5)). We consider that Temasek meets the criteria for a passive investor under Rule 14A.31(10)(b). Therefore, any connected transactions or continuing connected transactions of a revenue nature in the ordinary and usual course of our business and on normal commercial terms with an associate of Temasek will be exempt from the reporting, annual review, announcement and independent shareholders' approval requirements under the Hong Kong Listing Rules. This exemption will be applicable to, among others, the types of Ongoing Banking Transactions described in the announcement and Notice of AGM.

Instead of maintaining a list of Temasek associates the Company will adopt a new internal procedure to identify connected transactions with Temasek associates. The starting point for each relevant business line will be to ascertain whether the transaction is of a revenue nature in the "ordinary and usual course of business" and on "normal commercial terms" (as those terms are defined in the Hong Kong Listing Rules). If the answer is yes, the new passive investor exemption will be applicable and there will be no need to report on, review, announce or seek independent shareholders' approval for the transaction in question. If the answer is no, then specific enquiries will be made to ascertain whether the counterparty is an associate of Temasek and, if so, whether the transaction is exempt under any of the other exemptions in the Hong Kong Listing Rules such as those for de minimis transactions.

If none of the exemptions under the Hong Kong Listing Rules or the waivers obtained from the Hong Kong Stock Exchange are applicable in relation to a transaction with an associate of Temasek, the Company will continue to comply with the applicable reporting, annual review, announcement and independent shareholders' approval requirements.

G. Draft Code for Financial Reporting Disclosure

In October 2009, the British Bankers' Association published a draft Code for Financial Reporting Disclosure. The draft Code sets out five disclosure principles together with supporting guidance. The principles are that UK banks will: provide high quality, meaningful and decision useful disclosures; review and enhance their financial instrument disclosures for key areas of interest; assess the applicability and relevance of good practice recommendations to their disclosures acknowledging the importance of such guidance; seek to enhance the comparability of financial statement disclosures across the UK banking sector; and clearly differentiate in their annual reports between information that is audited and information that is unaudited. The Group and other major UK banks have voluntarily adopted the draft Code in their 2010 interim financial statements. The Group's Interim financial statements for the six months ended 30 June 2010 have therefore been prepared in compliance with the draft Code's principles.

H. Shareholder information

2010 Interim dividend
Ex dividend date	11 August 2010
Record date for dividend	13 August 2010
Dividend payment date	5 October 2010

2010 Final dividend	(provisional only)
Results and dividend announced	2 March 2011
Preference shares	Next half-yearly dividend
7 ³/₈ per cent Non-Cumulative Irredeemable preference shares of £1 each	1 October 2010
8 ¼ per cent Non-Cumulative Irredeemable preference shares of £1 each	1 October 2010
6.409 per cent Non-Cumulative preference shares of $5 each	30 July 2010
7.014 per cent Non-Cumulative preference shares of $5 each	30 July 2010
8.125 per cent Non-Cumulative preference shares of $5 each	27 November 2010

Previous dividend payments (not adjusted for rights issue)

Dividend and financial year	Payment date	Cash dividend per ordinary share	Cost of one new ordinary share under the share dividend scheme
Interim 2000	13 October 2000	7.425p	974.3p
Final 2000	25 May 2001	17.71p	No offer
Interim 2001	12 October 2001	12.82c/8.6856p	No offer
Final 2001	17 May 2002	29.10c/19.91p	£8.43/$12.32
Interim 2002	15 October 2002	14.10c/9.023p	£6.537/$10.215
Final 2002	13 May 2003	32.9c/20.692p/ HK$2.566	£6.884/$10.946
Interim 2003	10 October 2003	15.51c/9.3625p/HK$1.205	£8.597/$14.242
Final 2003	14 May 2004	36.49c/20.5277p/HK$2.8448	£8.905/$15.830
Interim 2004	8 October 2004	17.06c/9.4851p/HK$1.3303	£9.546/$17.16958
Final 2004	13 May 2005	40.44c/21.145p/HK$3.15156	£9.384/$17.947
Interim 2005	14 October 2005	18.94c/10.7437p/HK$1.46911	£11.878/$21.3578
Final 2005	12 May 2006	45.06c/24.9055p/HK$3.49343	£14.276/$24.77885
Interim 2006	11 October 2006	20.83c/11.14409p/HK$1.622699	£13.2360/$25.03589
Final 2006	11 May 2007	50.21c/25.17397p/HK$3.926106	£14.2140/$27.42591
Interim 2007	10 October 2007	23.12c/11.39043p/HK$1.794713	£15.2560/$30.17637
Final 2007	16 May 2008	56.23c/28.33485p/HK$4.380092	£16.2420/$32.78447
Interim 2008	9 October 2008	25.67c/13.96133p/HK$1.995046	£14.00/$26.0148
Final 2008	15 May 2009	42.32c/28.4693p/HK$3.279597	£8.342/$11.7405
Interim 2009	8 October 2009	21.23c/13.25177p/HK$1.645304	£13.876/$22.799
Final 2009	13 May 2010	44.80c/29.54233p/HK$3.478306	£17.351/$26.252

ShareCare

ShareCare is available to shareholders on the Company's United Kingdom register who have a United Kingdom address and bank account, and allows you to hold your Standard Chartered shares in a nominee account. Your shares will be held in electronic form so you will no longer have to worry about keeping your share certificates safe. If you join ShareCare you will still be invited to attend the Company's AGM and you will still receive your dividend at the same time as everyone else. ShareCare is free to join and there are no annual fees to pay. If you would like to receive more information please visit our website at http://investors.standardchartered.com/mypage.cfm or contact the shareholder helpline on 0870 702 0138.

Donating shares to ShareGift

Shareholders who have a small number of shares often find it uneconomical to sell them. An alternative is to consider donating them to the charity ShareGift (registered charity 1052686), which collects donations of unwanted shares until there are enough to sell and uses the proceeds to support UK charities. Further information can be obtained from the Company's Registrars or from ShareGift on 020 7930 3737 or from www.sharegift.org. There is no implication for Capital Gains Tax (no gain no loss) when you donate shares to charity and UK tax payers may be able to claim income tax relief on the value of their donation.

Bankers' Automated Clearing System (BACS)

Dividends can be paid straight into your bank or building society account. Please register online at www.investorcentre.co.uk contact our registrar for a mandate form.

Registrars and shareholder enquiries

If you have any enquiries relating to your shareholding and you hold your shares on the United Kingdom register, please contact our registrar Computershare Investor Services PLC at The Pavilions, Bridgwater Road, Bristol, BS99 7ZY. There is a shareholder helpline on 0870 702 0138.

If you hold your shares on the Hong Kong branch register and you have enquiries, please contact Computershare Hong Kong Investor Services Limited, 17M, Hopewell Centre, 183 Queen's Road East, Wan Chai, Hong Kong. You can check your shareholding at: www.investorcentre.co.uk

Chinese translation

If you would like a Chinese version of this Half year report, please contact: Computershare Hong Kong Investor Services Limited at 17M, Hopewell Centre, 183 Queen's Road East, Hong Kong.

本半年報告之中文譯本可向香港中央證券登記有限公司索取，地址﹕香港皇后大道東183號合和中心17M樓

Shareholders on the Hong Kong branch register who have asked to receive corporate communications in either Chinese or English can change this election by contacting Computershare.

If you hold Indian Depository Receipts and you have enquiries, please contact Karvy Computershare Private Limited, 17-24, Vithalrao Nagar, Madhapur, Hyderabad 500 001, India.

If there is a dispute between any translation and the English version of this Half year report, the English text shall prevail.

Taxation

Information on taxation applying to dividends paid to you if you are a shareholder in the United Kingdom, Hong Kong and the United States will be sent to you with your dividend documents.

I. Convenience translation of selected financial statements into Indian Rupees
In compliance with clause 37(3) of Indian Depository Receipts Listing agreement, the condensed interim financial statements on pages 109 to 113 are presented in Indian Rupees (INR) using a US Dollar / Indian Rupee exchange rate of 46.60 as at 30 June 2010 as published by Reserve Bank of India. Amounts have been translated using the said exchange rate including totals and sub-totals and any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

Condensed consolidated interim income statement (Translated to INR)
For the six months ended 30 June 2010
	6 months ended	6 months ended	6 months ended
	30.06.10	30.06.09	31.12.09
	Rs. million	Rs. million	Rs. million
Interest income	301,129	302,434	299,918
Interest expense	(107,506)	(130,014)	(117,106)
Net interest income	193,623	172,420	182,812
Fees and commission income	106,621	86,350	91,849
Fees and commission expense	(6,524)	(7,829)	(13,328)
Net trading income	62,957	81,084	53,590
Other operating income	12,582	38,911	21,716
Non-interest income	175,635	198,516	153,827
Operating income	369,258	370,936	336,638
Staff costs	(130,853)	(121,999)	(106,900)
Premises costs	(17,755)	(14,632)	(17,894)
General administrative expenses	(41,194)	(40,076)	(44,829)
Depreciation and amortisation	(12,629)	(10,951)	(13,281)
Operating expenses	(202,430)	(187,658)	(182,905)
Operating profit before impairment losses and taxation	166,828	183,278	153,733
Impairment losses on loans and advances and other credit risk provisions	(20,364)	(50,701)	(42,499)
Other impairment	(2,330)	(699)	(4,054)
Profit from associates	1,072	373	606
Profit before taxation	145,206	132,251	107,786
Taxation	(43,571)	(39,470)	(38,538)
Profit for the period	101,635	92,781	69,248

Profit attributable to:
Non-controlling interests	1,538	2,703	1,817
Parent company shareholders	100,097	90,078	67,430
Profit for the period	101,635	92,781	69,248

	Rupees	Rupees	Rupees
Earnings per share:
Basic earnings per ordinary share	48.2	46.0	32.6
Diluted earnings per ordinary share	47.5	45.7	32.2

Dividends per ordinary share:
Interim dividend declared	10.88	-	-
Interim dividend paid	-	9.89	-
Final dividend paid	-	-	20.88

	Rs million	Rs million	Rs million
Total dividend:
Total interim dividend payable	22,415	-	-
Total interim dividend (paid 8 October 2009)	-	19,805	-
Total final dividend (paid 13 May 2010)	-	-	42,126

Condensed consolidated interim statement of comprehensive income (Translated to INR)
For the six months ended 30 June 2010
		6 months ended	6 months ended	6 months ended
		30.06.10	30.06.09	31.12.09
		Rs.million	Rs.million	Rs.million
Profit for the period		101,635	92,781	69,248
Other comprehensive income :
Exchange differences on translation of foreign operations:
	Net (losses)/gains taken to equity	(13,561)	(1,771)	29,731
Actuarial losses on retirement benefit obligations		(1,957)	(5,918)	(1,072)
Share of other comprehensive income from associates		(140)	-	885
Available-for-sale investments:
	Net valuation gains/(losses) taken to equity	22,321	(1,398)	22,601
	Reclassified to income	(3,402)	(17,708)	(9,320)
Cash flow hedges:
	Net (losses)/gains taken to equity	(1,678)	2,050	(1,398)
	Reclassified to income	1,678	3,215	1,724
Taxation relating to components of other comprehensive income		(4,380)	4,893	(2,004)
Other comprehensive income for the period, net of taxation		(1,118)	(16,636)	41,148
Total comprehensive income for the period		100,516	76,144	110,395

Total comprehensive income attributable to:
Non-controlling interests		2,237	3,029	2,144
Parent company shareholders		98,279	73,115	108,252
		100,516	76,144	110,395

Condensed consolidated interim balance sheet (Translated to INR)
As at 30 June 2010
	30.06.10	30.06.09	31.12.09
	Rs.million	Rs.million	Rs.million
Assets
Cash and balances at central banks	1,383,740	565,771	844,905
Financial assets held at fair value through profit or loss	1,131,774	766,570	1,045,984
Derivative financial instruments	2,076,263	2,135,352	1,779,794
Loans and advances to banks	2,301,574	2,114,056	2,371,241
Loans and advances to customers	10,019,233	8,516,057	9,240,407
Investment securities	3,578,274	3,383,906	3,528,925
Other assets	1,154,329	915,830	801,567
Current tax assets	7,409	30,243	9,460
Prepayments and accrued income	189,755	199,168	151,031
Interests in associates	28,892	22,694	23,952
Goodwill and intangible assets	303,506	298,426	308,492
Property, plant and equipment	185,049	183,324	191,200
Deferred tax assets	46,740	31,455	51,074
Total assets	22,406,538	19,162,852	20,348,030

Liabilities
Deposits by banks	1,486,680	1,567,344	1,792,283
Customer accounts	13,005,547	10,724,850	11,707,970
Financial liabilities held at fair value through profit or loss	856,508	789,730	675,933
Derivative financial instruments	2,023,605	2,008,879	1,704,814
Debt securities in issue	1,554,762	972,076	1,364,075
Other liabilities	1,105,166	959,867	752,077
Current tax liabilities	41,800	27,587	37,373
Accruals and deferred income	166,455	162,774	191,666
Subordinated liabilities and other borrowed funds	724,863	788,565	779,618
Deferred tax liabilities	8,341	8,202	8,994
Provisions for liabilities and charges	10,438	14,446	8,574
Retirement benefit obligations	21,902	25,257	23,580
Total liabilities	21,006,068	18,049,578	19,046,958

Equity
Share capital	48,324	45,062	47,206
Reserves	1,324,419	1,041,976	1,226,838
Total parent company shareholders' equity	1,372,743	1,087,038	1,274,044
Non-controlling interests	27,727	26,236	27,028
Total equity	1,400,470	1,113,274	1,301,072
Total equity and liabilities	22,406,538	19,162,852	20,348,030

Condensed consolidated interim statement of changes in equity (Translated to INR)

For the six months ended 30 June 2010

		Share capital	Share premium account	Capital and Capital redepmtion reserve¹	Merger reserve	Available- for-sale reserve	Cash flow hedge reserve	Translation reserve	Retained earnings	Parent company shareholders equity	Non-controlling interests	Total
		Rs.million	Rs.million	Rs.million	Rs.million	Rs.million	Rs.million	Rs.million	Rs.million	Rs.million	Rs.million	Rs.million
At 1 January 2009		44,177	221,024	839	261,752	(233)	(3,868)	(83,134)	591,168	1,031,724	25,863	1,057,587
Profit for the period		-	-	-	-	-	-	-	90,078	90,078	2,703	92,781
Other comprehensive income		-	-	-	-	(14,726)	3,635	(1,771)	(4,101)²	(16,962)	326	(16,636)
Distributions		-	-	-	-	-	-	-	-	-	(2,516)	(2,516)
Shares issued, net of expenses		140	1,817	-	-	-	-	-	-	1,957	-	1,957
Net own shares adjustment		-	-	-	-	-	-	-	(3,215)	(3,215)	-	(3,215)
Share option expense, net of taxation		-	-	-	-	-	-	-	5,452	5,452	-	5,452
Capitalised on scrip dividend		746	(746)	-	-	-	-	-	-	-	-	-
Dividends, net of scrip		-	-	-	-	-	-	-	(21,995)	(21,995)	-	(21,995)
Other decreases		-	-	-	-	-	-	-	-	-	(140)	(140)
At 30 June 2009		45,062	222,096	839	261,752	(14,959)	(233)	(84,905)	657,386	1,087,038	26,236	1,113,274
Profit for the period		-	-	-	-	-	-	-	67,430	67,430	1,817	69,248
Other comprehensive income		-	-	-	-	10,625	932	29,684	(419)²	40,822	326	41,148
Distributions		-	-	-	-	-	-	-	-	-	(1,538)	(1,538)
Shares issued, net of expenses		1,911	3,122	-	77,682	-	-	-	-	82,715	-	82,715
Net own shares adjustment		-	-	-	-	-	-	-	(559)	(559)	-	(559)
Share option expense, net of taxation		-	-	-	-	-	-	-	9,040	9,040	-	9,040
Capitalised on scrip dividend		233	(233)	-	-	-	-	-	-	-	-	-
Dividends, net of scrip		-	-	-	-	-	-	-	(12,442)	(12,442)	-	(12,442)
Other increases		-	-	-	-	-	-	-	-	-	186	186
At 31 December 2009		47,206	224,985	839	339,434	(4,334)	699	(55,221)	720,436	1,274,044	27,028	1,301,072
Profit for the period		-	-	-	-	-	-	-	100,097	100,097	1,538	101,635
Other comprehensive income		-	-	-	-	13,374	(47)	(13,421)	(1,724)²	(1,817)	699	(1,118)
Distributions		-	-	-	-	-	-	-	-	-	(1,491)	(1,491)
Shares issued, net of expenses		699	24,185	-	-	-	-	-	-	24,884	-	24,884
Net own shares adjustment		-	-	-	-	-	-	-	(7,596)	(7,596)	-	(7,596)
Share option expense, net of taxation		-	-	-	-	-	-	-	5,359	5,359	-	5,359
Capitalised on scrip dividend		419	(419)	-	-	-	-	-	-	-	-	-
Dividends, net of scrip		-	-	-	-	-	-	-	(22,228)	(22,228)	-	(22,228)
Other decreases		-	-	-	-	-	-	-	-	-	(47)	(47)
At 30 June 2010		48,324	248,751	839	339,434	9,040	652	(68,642)	794,344	1,372,743	27,727	1,400,470

¹	Includes capital reserve of Rs. 233 million and capital redemption reserve of Rs. 606 million at 1 January 2009, 30 June 2009, 31 December 2009 and 30 June 2010.
²	For the period ended 30 June 2010, comprises actuarial losses, net of taxation and non-controlling interests of Rs. (1,584) million (30 June 2009: Rs. (4,101) million and 31 December 2009: Rs. (1,305) million) and share of comprehensive income from associates of Rs. (140) million (30 June 2009: Rs. nil million and 31 December 2009: Rs. 885 million).

Condensed consolidated interim cash flow statement (Translated to INR)
For the six months ended 30 June 2010
	6 months ended	6 months ended	6 months ended
	30.06.10	30.06.09¹	31.12.09¹
	Rs.million	Rs.million	Rs.million
Cash flows from operating activities
Profit before taxation	145,206	132,251	107,786
Adjustments for:
Non-cash items included within income statement	38,212	18,873	45,668
Change in operating assets	(2,701,821)	508,919	(370,889)
Change in operating liabilities	2,148,959	(1,145,336)	646,342
Contributions to defined benefit schemes	(3,495)	(979)	(4,800)
UK and overseas taxes paid, net of refund	(37,187)	(26,422)	(29,964)
Net cash (used in)/from operating activities	(410,126)	(512,694)	394,143
Net cash flows from investing activities
Purchase of property, plant and equipment	(7,409)	(3,961)	(8,202)
Disposal of property, plant and equipment	5,639	2,423	7,736
Acquisition of investment in subsidiaries and associates, net of cash acquired	(10,625)	(2,097)	(1,072)
Purchase of investment securities	(2,637,047)	(2,726,147)	(3,319,691)
Disposal and maturity of investment securities	2,576,747	2,625,025	3,278,170
Dividends received from investment in associates	419	466	47
Net cash used in investing activities	(72,277)	(104,291)	(43,012)
Net cash flows from financing activities
Issue of ordinary and preference share capital, net of expenses	24,884	1,957	82,715
Purchase of own shares	(8,295)	(3,821)	(979)
Exercise of share options through ESOP	699	606	419
Interest paid on subordinated liabilities	(26,143)	(26,469)	(14,166)
Gross proceeds from issue of subordinated liabilities	34,950	81,177	14,959
Repayment of subordinated liabilities	(71,484)	(81,876)	(31,828)
Dividends paid to non-controlling interests and preference shareholders,
net of scrip	(3,821)	(4,846)	(3,914)
Dividends paid to ordinary shareholders, net of scrip	(19,898)	(19,665)	(10,066)
Net cash (used in)/from financing activities	(69,108)	(52,937)	37,140
Net (decrease)/increase in cash and cash equivalents	(551,511)	(669,922)	388,271
Cash and cash equivalents at beginning of the period	3,172,202	3,434,373	2,759,186
Effect of exchange rate movements on cash and cash equivalents	(3,262)	(5,266)	24,745
Cash and cash equivalents at end of the period	2,617,429	2,759,186	3,172,202
¹ Amounts have been restated

J. Summary of significant differences between Indian GAAP and IFRS

The condensed consolidated interim financial statements of the Group for the period ended 30 June 2010 with comparatives as at 31 December 2009 and 30 June 2009 are prepared in accordance with the Disclosure and Transparency Ruling, the UK Financial Services Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union.

IFRS differs in certain significant respects from Indian Generally Accepted Accounting Principles (GAAP). Such differences involve methods for measuring the amounts shown in the financial statements of the Group, as well as additional disclosures required by Indian GAAP.

Set out below are descriptions of certain accounting differences between IFRS and Indian GAAP that could have a significant effect on profit attributable to parent company shareholders for the period ended 30 June 2010, 31 December 2009 and 30 June 2009 and total parent company shareholders' equity as at the same date. This section does not provide a comprehensive analysis of such differences. In particular, this description considers only those Indian GAAP pronouncements for which adoption or application is required in financial statements for years and periods ended on or prior to 30 June 2010. The Group has not quantified the effect of differences between IFRS and Indian GAAP, nor prepared consolidated financial statements under Indian GAAP, nor undertaken a reconciliation of IFRS and Indian GAAP financial statements. Had the Group undertaken any such quantification or preparation or reconciliation, other potentially significant accounting and disclosure differences may have come to its attention which are not identified below. Accordingly, the Group does not provide any assurance that the differences identified below represent all the principal differences between IFRS and Indian GAAP relating to the Group. Furthermore, no attempt has been made to identify future differences between IFRS and Indian GAAP. Finally, no attempt has been made to identify all differences between IFRS and Indian GAAP that may affect the financial statements as a result of transactions or events that may occur in the future.

In making an investment decision, potential investors should consult their own professional advisers for an understanding of the differences between IFRS and Indian GAAP and how those differences may have affected the financial results of the Group. The summary does not purport to be complete and is subject and qualified in its entirety by reference to the pronouncements of the International Accounting Standards Board (IASB), together with the pronouncements of the Indian accounting profession.

Changes in accounting policy

IFRS

Changes in accounting policy are applied retrospectively. Comparatives are restated and the effect of period(s) not presented is adjusted against opening retained earnings of the earliest year presented. Policy changes made on the adoption of a new standard are made in accordance with that standard's transitional provisions.

Indian GAAP

The cumulative amount of the change is included in the income statement for the period in which the change is made except as specified in certain standards (transitional provision) where the change during the transition period resulting from adoption of the standard has to be adjusted against opening retained earnings and the impact needs to be disclosed.

Functional and presentation currency

IFRS

Assets and liabilities are translated at the exchange rate at the balance sheet date when the financial statements are presented in a currency other than the functional currency. Income statement items are translated at the exchange rate at the date of transaction or at average rates. The functional currency is the currency of the primary economic environment in which an entity operates. The presentation currency of the Group is US dollars.

Indian GAAP

There is no concept of functional or presentation currency. Entities in India have to prepare their financial statements in Indian rupees.

Consolidation

IFRS

Entities are consolidated when the Group has the power to govern the financial and operating policies so as to obtain benefits. Control is presumed to exist when the Group owns more than one half of an entity's voting power. Currently exercisable voting rights should also be taken into consideration when determining whether control exists.

Indian GAAP

Similar to IFRS, except that currently exercisable voting rights are not considered in determining control.

Consolidation of Special Purpose Vehicles

IFRS

Under the IASB's Standards Interpretations Committee (SIC) Interpretation 12 (SIC-12), an SPE should be consolidated when the substance of the relationship between an enterprise and the SPE indicates that the SPE is controlled by that entity. The definition of an SPE includes employee share trusts.

Indian GAAP

No specific guidance. SPEs including employee share trusts are not consolidated.

J. Summary of significant differences between Indian GAAP and IFRS continued

Business combinations

IFRS

All business combinations are treated as acquisitions. Assets, liabilities and contingent liabilities acquired are measured at their fair values. Pooling of interest method is prohibited.

For acquisitions occurring on or after 1 January 2004, IFRS 3 'Business Combinations' (IFRS 3) requires that, when assessing the value of the assets of an acquired entity, certain identifiable intangible assets must be recognised and if considered to have a finite life, amortised through the income statement over an appropriate period. As the Group has not applied IFRS 3, or its predecessor IAS 22, to transactions that occurred before 1 January 2004, no intangible assets, other than goodwill, were recognised on acquisitions prior to that date.

Adjustments to provisional fair values are permitted provided those adjustments are made within 12 months from the date of acquisition, with a corresponding adjustment to goodwill.

After re-assessment of respective fair values of net assets acquired, any excess of acquirer's interest in the net fair values of acquirer's identifiable assets is recognised immediately in the income statement.

Where less than 100 per cent of an entity is acquired, the non-controlling interest is stated at their proportion of the fair value of the identifiable net assets and contingent liabilities acquired.

Indian GAAP

Treatment of a business combination depends on whether the acquired entity is held as a subsidiary, whether it is an amalgamation or whether it is an acquisition of a business.

For an entity acquired and held as a subsidiary, the business combination is accounted for as an acquisition. The assets and liabilities acquired are incorporated at their existing carrying amounts.

For an amalgamation of an entity, either pooling of interests or acquisition accounting may be used. The assets and liabilities amalgamated are incorporated at their existing carrying amounts or, alternatively, if acquisition accounting is adopted, the consideration can be allocated to individual identifiable assets (which may include intangible assets) and liabilities on the basis of their fair values.

Adjustments to the value of acquired or amalgamated balances are not permitted after initial recognition.

Any excess of acquirer's interest in the net fair values of acquirer's identifiable assets is recognised as capital reserve, which is neither amortised nor available for distribution to shareholders. However, in case of an amalgamation accounted under the purchase method, the fair value of intangible assets with no active market is reduced to the extent of capital reserve, if any, arising on the amalgamation.

Minority interests arising on the acquisition of a subsidiary are recognised at their share of the historical book value.

Goodwill

IFRS

IFRS 3 requires that goodwill arising on all acquisitions by the Group and associated undertakings is capitalised but not amortised and is subject to an annual review for impairment. Under the transitional provisions of IFRS 1, the Group has not applied IFRS 3, or its predecessor IAS 22, to transactions that occurred before 1 January 2004, the date of transition to IFRS. Accordingly, goodwill previously written off to reserves, as permitted under UK GAAP until the implementation of FRS 10 'Goodwill and intangible assets' in 1998, has not been reinstated nor will it be written back on disposal.

Amortisation of goodwill that has been charged up to 31 December 2003 has not been reversed and the deemed carrying value of the goodwill on transition to IFRS is equal to the net book value as at 31 December 2003.

Goodwill is tested annually for impairment. Any impairment losses recognised may not be reversed in subsequent accounting periods.

Indian GAAP

Goodwill arising for amalgamations is capitalised and amortised over useful life not exceeding five years, unless a longer period can be justified.

For goodwill arising on acquisition of a subsidiary or a business, there is no specific guidance - in practice there is either no amortisation or amortisation not exceeding 10 years.

Goodwill is reviewed for impairment whenever an indicator of impairment exists. Impairment losses recognised may be reversed under exceptional circumstances only in subsequent accounting periods through the income statement.

Acquired and internally generated intangible assets

IFRS

Intangible assets are recognised if the specific criteria are met. Assets with a finite useful life are amortised on a systematic basis over their useful life. An asset with an indefinite useful life and which is not yet available for use should be tested for impairment annually.

Indian GAAP

Intangible assets are capitalised if specific criteria are met and are amortised over their useful life, generally not exceeding 10 years. The recoverable amount of an intangible asset that is not available for use or is being amortised over a period exceeding 10 years should be reviewed at least at each financial year-end even if there is no indication that the asset is impaired.

J. Summary of significant differences between Indian GAAP and IFRS continued

Property, plant and equipment

IFRS

Fixed assets are recorded at cost or revalued amounts. Under the transition rules of IFRS 1, the Group elected to freeze the value of all its properties held for its own use at their 1 January 2004 valuations, their 'deemed cost' under IFRS. They will not be revalued in the future.

Foreign exchange gains or losses relating to the procurement of property, plant and equipment, under very restrictive conditions, can be capitalised as part of the asset.

Depreciation is recorded over the asset's estimated useful life. The residual value and the useful life of an asset and the depreciation method shall be reviewed at least at each financial year-end.

The Group has the option to capitalise borrowing costs incurred during the period that the asset is getting ready for its intended use.

Indian GAAP

Fixed assets are recorded at historical costs or revalued amounts.

Relevant borrowing costs are capitalised if certain criteria are met.

Depreciation is recorded over the asset's useful life. Schedule XIV of the Companies Act and Banking Regulations prescribe minimum rates of depreciation and these are typically used as the basis for determining useful life.

Recognition and measurement of financial instruments

IFRS

IAS 39 requires all financial instruments to be initially measured at their fair value, which is usually to be the transaction price. In those cases where the initial fair value is based on a valuation model that uses inputs which are not observable in the market, the difference between the transaction price and the valuation model is not recognised immediately in the income statement but is amortised to the income statement until the inputs become observable, the transaction matures or is terminated.

At the time of initial recognition, IAS 39 requires all financial assets to be classified as either:

• held at fair value through profit or loss (as a trading instrument or as designated by management), with realised and unrealised gains or losses reflected in profit or loss; or

• available for-sale at fair value, with unrealised gains and losses reflected in shareholders' equity, and recycled to the income statement when the asset is sold or is impaired; or

• held-to-maturity at amortised cost, where there is the intent and the ability to hold them to maturity; or

• as loans and receivables at amortised cost.

At the time of initial recognition, IAS 39 requires all financial liabilities to be classified as either:

• held at fair value through profit or loss (as a trading instrument or as designated by management), with realised and unrealised gains or losses reflected in profit or loss; or

• at amortised cost.

A financial asset or financial liability, other than one held for trading, can be designated as being held at fair value through profit or loss if it meets the criteria set out below:

• the designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities on a different basis, or

• a group of financial assets and/or liabilities is managed and its performance evaluated on a fair value basis, or

• assets or liabilities include embedded derivatives and such derivatives are not recognised separately.

The designation of a financial instrument as held at fair value through profit or loss is irrevocable in respect of the financial instruments to which it relates. Subsequent to initial recognition instruments cannot be classified into or out of this category.

Changes in the fair value of available for sale financial assets resulting from movements in foreign currency exchange rates are included in the income statement as exchange differences. Foreign currency exchange movements for available for sale equity securities is recognised in reserves.

Indian GAAP

Investments are categorised as follows:

• Current investments, which are those readily realisable and intended to be held for less than one year, are carried at the lower of cost and fair value, with changes in fair value taken directly to profit or loss;

• Long term investments, which are those investments not classified as current, are carried at cost unless there is a permanent diminution in value, in which case a provision for diminution is required to be made by the entity.

For investments, Reserve Banking India regulations require similar classifications to IFRS, but the classification criteria and measurement requirements differ from those set out in IFRS.

Financial liabilities are usually carried at cost.

There is no ability to designate instruments at fair value.

J. Summary of significant differences between Indian GAAP and IFRS continued

Measurement of derivative instruments and hedging activities

IFRS

IAS 39 requires that all derivatives be recognised on balance sheet at fair value. Changes in the fair value of derivatives that are not hedges are reported in the income statement. Changes in the fair value of derivatives that are designated as hedges are either offset against the change in fair value of the hedged asset or liability through earnings or recognised directly in equity until the hedged item is recognised in earnings, depending on the nature of the hedge. The ineffective portion of the hedge's change in fair value is immediately recognised in earnings. A derivative may only be classified as a hedge if an entity meets stringent qualifying criteria in respect of documentation and hedge effectiveness.

IAS 39 requires the separation of derivatives embedded in a financial instrument if it is not deemed to be closely related to the economic characteristics of the underlying host instrument.

Indian GAAP

Only certain derivatives are recognised on the balance sheet. Foreign exchange contracts held for trading or speculative purposes are carried at fair value, with gains and losses recognised in the income statement. Otherwise, the premium or discount is amortised over the life of the contract and the exchange difference is recognised in income when the exchange rate changes.

Equity options are carried at the lower of cost or market value.

There is no specific guidance on hedge accounting since Accounting Standard 30 is not mandatory.

Impairment of financial assets

IFRS

At each balance sheet date, an assessment is made as to whether there is any objective evidence of impairment. A financial asset is impaired and impairment losses are incurred if, any only if, there is objective evidence of impairment.

Assets held at amortised cost

If objective evidence of impairment exists, an assessment is made to determine what, if any, impairment loss should be recognised. The impairment loss is the difference between the asset's carrying amount and its estimated recoverable amount.

The recoverable amount is determined based on the present value of expected future cash flows, discounted at the instrument's original effective interest rate, either individually or collectively. Individually assessed assets for which there is no objective evidence of impairment are collectively assessed for impairment.

Available-for-sale assets

If objective evidence of impairment exists, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any previously recognised impairment) is removed from equity and recognised in the income statement.

Market recoveries leading to a reversal of an impairment provision for available-for-sale debt securities are recognised in the income statement. Impairment losses for equity instruments classified as available-for-sale are not permitted to be reversed through profit or loss.

Indian GAAP

Long-term investments are written down when there is a decline in fair value which is deemed to be other than temporary. Impairments may be reversed through the income statement in subsequent periods if the investment rises in value, or the reasons for the impairment no longer exist.

Derecognition of financial assets

IFRS

A financial asset is derecognised if substantially all the risks and rewards of ownership have been transferred. If substantially all the risks and rewards have not been transferred, the asset will continue to be recognised to the extent of any continuing involvement.

Indian GAAP

There is limited guidance on derecognition of financial assets. Securitised financial assets can only be derecognised if the originator has surrendered control over the assets. Control is not surrendered where the securitised assets are not beyond the reach of the creditors of the originator or where the transferee does not have the right to pledge, sell, transfer or exchange the securitised asset for its own benefit, or where there is an option entitles the originator to repurchase the financial assets transferred under a securitisation transaction from the transferee.

Liabilities and equity

IFRS

A financial instrument is classified as a liability where there is a contractual obligation to deliver either cash or another financial asset to the holder of that instrument, regardless of the manner in which the contractual obligation will be settled.

Preference shares, which carry a mandatory coupon or are redeemable on a specific date or at the option of the shareholder, are classified as financial liabilities and are presented in other borrowed funds. The dividends on these preference shares are recognised in the income statement as interest expense on an amortised cost basis using the effective interest method.

Indian GAAP

Classification is based on the legal form rather than substance.

All preference shares are disclosed separately as share capital under shareholders' funds.

J. Summary of significant differences between Indian GAAP and IFRS continued

Provisions for liabilities and charges

IFRS

The amount recognised as a provision is the best estimate at the balance sheet date of the expenditure required to settle the obligation, discounted using a pre-tax market discount rate if the effect is material.

Indian GAAP

Provisions are recognised and measured on a similar basis to IFRS, except that discounting is not permitted.

Pension obligations

IFRS

IAS 19 'Employee Benefits' (IAS 19) requires defined benefit pension liabilities to be assessed on the basis of current actuarial valuations performed on each plan, and pension assets to be measured at fair value. The net pension surplus or deficit, representing the difference between plan assets and liabilities, is recognised on the balance sheet.

The discount rate to be used for determining defined benefit obligations is established by reference to market yields at the balance sheet date on high quality corporate bonds of a currency and term consistent with the currency and term of the post employment benefit obligations.

Under the transitional provisions of IFRS 1 'First time adoption of International Financial Reporting Standards' (IFRS 1) and in accordance with IAS 19, the Group has elected to record all actuarial gains and losses on the pension surplus or deficit in the year in which they occur within the 'Consolidated statement of comprehensive income'.

Indian GAAP

The liability for defined benefit plans is determined on a similar basis to IFRS.

The discount rate to be used for determining defined benefit obligations is established by reference to market yields at the balance sheet date on government bonds.

Actuarial gains or losses are recognised immediately in the statement of income.

Share based compensation

IFRS

IFRS 2 'Share based payment' requires that all share-based payments are accounted for using a fair value method.

The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. For equity-settled awards, the total amount to be expensed over the vesting period must be determined by reference to the fair value of the options granted (determined using an option pricing model), excluding the impact of any non-market vesting conditions (for example, profitability and growth targets). Non-market vesting conditions must be included in assumptions about the number of options that are expected to become exercisable.

At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

Cash-settled awards must be revalued at each balance sheet date on an intrinsic value basis (being the difference between the market price of the share at the measurement date and the exercise price) with any changes in fair value charged or credited to staff costs in the income statement.

Deferred tax is recognised based on the intrinsic value of the award and is recorded in the income statement if the tax deduction is less than or equal to the cumulative share-based compensation expense or equity if the tax deduction exceeds the cumulative expense.

Indian GAAP

Entities may either follow the intrinsic value method or the fair value method for determining the costs of benefits arising from share based compensation plans. Although the fair value approach is recommended, entities may use the intrinsic value method and provide fair value disclosures.

Deferred tax is not recognised as it is not considered to represent a timing difference.

Deferred Taxation

IFRS

Deferred tax is determined based on temporary differences, being the difference between the carrying amount and tax base of assets and liabilities, subject to certain exceptions.

Deferred tax assets are recognised if it is probable (more likely than not) that sufficient future taxable profits will be available to utilise to deferred tax assets.

Indian GAAP

Deferred tax is determined based on timing differences, being the difference between accounting income and taxable income for a period that is capable of reversal in one or more subsequent periods.

Deferred tax assets recognised only if virtually certain with entities with tax losses carried forward or if reasonably certain with entities with no tax losses.

J. Summary of significant differences between Indian GAAP and IFRS continued

Interest income and expense

IFRS

Interest income and expense is recognised in the income statement using the effective interest method. The effective interest rate is the rate that discounts estimated future cash payments or receipts through the expected life of the financial instrument. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.

Indian GAAP

In the absence of a specific effective interest rate requirement, premiums and discounts are usually amortised on a straight line basis over the term of the instrument.

Dividends

IFRS

Dividends to holders of equity instruments, when proposed or declared after the balance sheet date, should not be recognised as a liability on the balance sheet date. A company however is required to disclose the amount of dividends that were proposed or declared after the balance sheet date but before the financial statements were authorised for issue.

Indian GAAP

Dividends are reflected in the financial statements of the year to which they relate even if proposed or approved after the year end.

Standard Chartered PLC - Glossary
Advances to deposit ratio	The ratio of total loans and advances to customers relative to total customer deposits. A low advances to deposits ratio demonstrates that customer deposits exceed customer loans resulting from emphasis placed on generating a high level of stable funding from customers.
Asset Backed Securities (ABS)	Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages and in the case of Collateralised Obligation (CDOs), the reference pool may be ABS.
Alt-A	Loans regarded as lower risk than sub-prime, but they share higher risk characteristics than lending under normal criteria.
Attributable profit to ordinary shareholders	Profit for the year after non-controlling interests and the declaration of dividends on preference shares classified as equity.
Collateralised Debt Obligations (CDOs)	Securities issued by a third party which reference ABSs and/or certain other related assets purchased by the issuer. CDOs may feature exposure to sub-prime mortgage assets through the underlying assets.
Collateralised Loan Obligation (CLO)	A security backed by the repayments from a pool of commercial loans. The payments may be made to different classes of owners (in tranches).
Commercial Mortgage Backed Securities (CMBS)	Securities that represent interests in a pool of commercial mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal).
Commercial real estate	Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multifamily housing buildings, warehouses, garages, and industrial properties. Commercial real estate loans are those backed by a package of commercial real estate assets.
Contractual maturities	Contractual maturity refers to the final payment date of a loan or other financial instrument, at which point all the remaining outstanding principal will be repaid and interest is due to be paid.
Cost: income ratio	Represents the proportion of total operating expense to total operating income.
Cover ratio	Represents the extent to which non-performing loans are covered by impairment allowances.
Commercial Paper (CP)	An unsecured promissory note issued to finance short-term credit needs. It specifies the face amount paid to investors on the maturity date.
Core Tier 1 Capital	Core Tier 1 capital comprises called-up ordinary share capital and eligible reserves plus non-controlling interests, less goodwill and other intangible assets and deductions relating to excess expected losses over eligible provisions and securitisation positions as specified by the UK's FSA (Financial Services Authority).
Core Tier 1 Capital ratio	Core Tier 1 capital as a percentage of risk weighted assets.
Credit Default Swaps (CDSs)	A credit derivative is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer upon a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.
Credit risk spread	The credit spread is the yield spread between securities with the same coupon rate and maturity structure but with different associated credit risks, with the yield spread rising as the credit rating worsens. It is the premium over the benchmark or risk-free rate required by the market to take on a lower credit quality.
Customer deposits	Money deposited by all individuals and companies which are not credit institutions. Such funds are recorded as liabilities in the Group's balance sheet under Customer accounts.
Debt restructuring	This is when the terms and provisions of outstanding debt agreements are changed. This is often done in order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the repayment schedule as well as debt or interest charge reduction.
Debt securities	Debt securities are assets on the Group's balance sheet and represent certificates of indebtedness of credit institutions, public bodies or other undertakings excluding those issued by central banks.
Debt securities in issue	Debt securities in issue are transferrable certificates of indebtedness of the Group to the bearer of the certificate. These are liabilities of the Group and include certificates of deposits.
Delinquency	A debt or other financial obligation is considered to be in a state of delinquency when payments are overdue. Loans are considered to be delinquent when consecutive payments are missed.
Dividend per share	Represents the entitlement of each shareholder in the share of the profits of the company. Calculated in the lowest unit of currency in which the shares are quoted.
Exposures	Credit exposures represent the amount lent to a customer, together with an undrawn commitments
First/Second Lien	First lien: debt that places its holder first in line to collect compensation from the sale of the underlying collateral in the event of a default on the loan. Second lien: debt that is issued against the same collateral as higher lien debt but that is subordinate to it. In the case of default, compensation for this debt will only be received after the first lien has been repaid and thus represents a riskier investment than the first lien.

Funded/unfunded exposures	Exposures where the notional amount of the transaction is funded. Represents exposures where there is a commitment to provide future funding is made but funds are not released.
Guaranteed mortgages	Mortgages for which there is a guarantor to provide the lender a certain level of financial security in the event of default of the borrower.
Home Loan	A loan to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a residential mortgage.
Impaired loans	Loans where individual identified impairment allowance has been raised and also include loans which are collateralised or where indebtedness has already been written down to the expected realisable value. The impaired loan category may include loans, which, while impaired, are still performing.
Impairment allowances	Impairment allowances are a provision held on the balance sheet as a result of the raising of a charge against profit for the incurred loss. An impairment allowance may either be identified or unidentified and individual or collective.
Individually/collectively assessed	Impairment is measured individually for assets that are individually significant, and collectively where a portfolio comprises homogenous assets and where appropriate statistical techniques are available. Typically assets within the Wholesale Banking business of the Group are assessed individually whereas assets within the Consumer Banking business are assessed on a portfolio basis.
Internal Ratings Based (IRB) approach	The IRB approach is used to calculate risk weighted assets in accordance with the Basel Capital Accord where capital requirements are based on a firm's own estimates of certain parameters.
Leveraged finance	Loans or other financing agreements provided to companies whose overall level of debt is high in relation to their cash flow (net debt : EBITDA) typically arising from private equity sponsor led acquisitions of the businesses concerned.
Liquidity and credit enhancements	Credit enhancement facilities are used to enhance the creditworthiness of financial obligations and cover losses due to asset default. Two general types of credit enhancement are third-party loan guarantees and self-enhancement through over-collateralisation. Liquidity enhancement makes funds available if required, for other reasons than asset default, e.g. to ensure timely repayment of maturing commercial paper.
Loans and advances	This represents lending made under bilateral agreements with customers entered into in the normal course of business and is based on the legal form of the instrument. An example of a loan product is a Home loan.
Loan-to-value ratio	The loan-to-value ratio is a mathematical calculation which expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. The loan-to-value ratio is used in determining the appropriate level of risk for the loan and therefore the correct price of the loan to the borrower.
Loans past due	Loans on which payments have been due for up to a maximum of 90 days including those on which partial payments are being made.
Mezzanine capital	Financing that combines debt and equity characteristics. For example, a loan that also confers some profit participation to the lender.
Mortgage Backed Securities (MBS)	Securities that represent interests in a group of mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal).
Mortgage related assets	Assets which are referenced to underlying mortgages.
Medium term notes (MTNs)	Corporate notes continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years.
Net asset value per share	Ratio of net assets (total assets less total liabilities) to number of ordinary shares outstanding.
Net interest income	The difference between interest received on assets and interest paid on liabilities. Group net interest income includes the impact of structural hedges which function to reduce the impact of the volatility of short term interest rate movements on equity and customer balances that do not re-price with market rates.
Net interest margin	The margin is expressed as net interest income divided by average interest earning assets.
Net interest yield	Interest income divided by average interest earning assets less interest expense divided by average interest bearing liabilities.
Net principal exposure	Net principal exposure is the gross principal amount of assets that are not protected by CDSs. It includes assets that benefit from monoline protection, except where this protection is purchased with a CDS.
Normalised earnings	Profit attributable to ordinary shareholders adjusted for profits or losses of a capital nature; amounts consequent to investment transactions driven by strategic intent; and other infrequent and/or exceptional transactions that are significant or material in the context of the Group's normal business earnings for the period
Prime	Prime mortgages have a higher credit quality and would be expected to satisfy the criteria for inclusion into Government programs
Private equity investments	Equity securities in operating companies generally not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies. Capital for private equity investment is raised by retail or institutional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.
Profit attributable to ordinary shareholders	Profit for the year after non-controlling interests and dividends declared in respect of preference shares classified as equity.
Renegotiated loans	Loans and advances are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstances of the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under which the Group offers a concessionary rate of interest to genuinely distressed borrowers. This will result in the asset continuing to be overdue and will be individually impaired where the renegotiated payments of interest and principal will not recover the original carrying amount of the asset. In other cases, renegotiation will lead to a new agreement, which is treated as a new loan.
Repo/Reverse repo	A repurchase agreement or repo is a short term funding agreements which allow a borrower to sell a financial asset, such as ABS or Government bonds as collateral for cash. As part of the agreement the borrower agrees to repurchase the security at some later date, usually less than 30 days, repaying the proceeds of the loan. For the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement or reverse repo.
Retail Loans	Money loaned to individuals rather than institutions. The loans may be for car or home purchases, medical care, home repair, holidays, and other consumer uses.
Return on equity	Represents the ratio of the current year's profit available for distribution to ordinary shareholders to the weighted average ordinary shareholders equity over the period under review.
Risk weighted assets	A measure of a bank's assets adjusted for their associated risks. Risk weightings are established in accordance with the Basel Capital Accord as implemented by the FSA.
Residential Mortgage Backed Securities (RMBS)	Securities that represent interests in a group of residential mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal).
Securitisation	Securitisation is a process by which debt instruments are aggregated into a pool, which is used to back new securities. A company sells assets to an SPE (special purpose entity) who then issues securities backed by the assets based on their value. This allows the credit quality of the assets to be separated from the credit rating of the original company and transfers risk to external investors.
Special purpose entities (SPEs)	SPEs are entities that are created to accomplish a narrow and well defined objective. There are often specific restrictions or limits around their ongoing activities. Transactions with SPEs take a number of forms, including: - The provision of financing to fund asset purchases, or commitments to provide finance for future purchases. - Derivative transactions to provide investors in the SPE with a specified exposure. - The provision of liquidity or backstop facilities which may be drawn upon if the SPE experiences future funding difficulties. - Direct investment in the notes issued by SPEs.
Structured finance /notes	A structured note is an investment tool which pays a return linked to the value or level of a specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities and foreign currency.
Student loan related assets	Assets which are referenced to underlying student loans.
Subordinated liabilities	Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.
Sub-Prime	Sub-prime is defined as loans to borrowers typically having weakened credit histories that include payment delinquencies and potentially more severe problems such as court judgements and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, high debt-to-income ratios, or other criteria indicating heightened risk of default.
Tier 1 capital	Tier 1 capital comprises Core Tier 1 capital plus innovative Tier 1 securities and preference shares and tax on excess expected losses less material holdings in credit or financial institutions.
Tier 1 capital ratio	Tier 1 capital as a percentage of risk weighted assets.
Tier 2 capital	Tier 2 capital comprises qualifying subordinated liabilities, allowable portfolio impairment provision and unrealised gains in the eligible revaluation reserves arising from the fair valuation of equity instruments held as available-for-sale.
VaR	Value at Risk is an estimate of the potential loss which might arise from market movements under normal market conditions, if the current positions were to be held unchanged for one business day, measured to a confidence level of 97.5 per cent.
Write Downs	The depreciation or lowering of the value of an asset in the books to reflect a decline in their value, or expected cash flows

Standard Chartered PLC - Financial calendar

Ex-dividend date	11 August 2010
Record date	13 August 2010
Expected posting to shareholders of 2010 Half Year Report	1 September 2010
Payment date - interim dividend on ordinary shares	5 October 2010

Copies of this statement are available from:

Investor Relations, Standard Chartered PLC, 1 Basinghall Avenue, London, EC2V 5DD or from our website on http://investors.standardchartered.com

For further information please contact:

Gavin Laws, Group Head of Corporate Affairs
+44 20 7885 7168

Stephen Atkinson, Head of Investor Relations
+44 20 7885 7245

Ashia Razzaq, Head of Investor Relations, Asia Pacific
+852 2820 3958

Uttam Hazarika, Manager, Investor Relations, India
+91 22 67350424

Tim Baxter, Head of Corporate Communications
+44 20 7885 5573

The following information will be available on our website:

Interim results video with Peter Sands, Group Chief Executive and Richard Meddings, Group Finance Director

Interim results presentation in pdf format

A live webcast of the interim results analyst presentation

The archived podcast, webcast and Q/A session of analyst presentation in London

Images of Standard Chartered are available for the media at http://www.standardchartered.com/global/mc/plib/directors_p01.html

Information regarding the Group's commitment to Sustainability is available at http://www.standardchartered.com/sustainability

Forward looking statements

It is possible that this document could or may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning. Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Group's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements.

There are several factors which could cause actual results to differ materially from those expressed or implied in forward looking statements. Among the factors that could cause actual results to differ materially from those described in the forward looking statements are changes in the global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions.

The Group undertakes no obligation to revise or update any forward looking statement contained within this document, regardless of whether those statements are affected as a result of new information, future events or otherwise.

Disclaimer

The securities referred to in this announcement have not been and will not be registered under the U.S. Securities Act of 1933 (the "U.S. Securities Act") and may not be offered, sold or transferred within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act. No public offering of the Placing Shares will be made in the United States.

Standard Chartered PLC - Index
	Page		Page
Assets at fair value through profit or loss	76	Investment securities	82
Asset backed securities	41	Liabilities at fair value through profit or loss	77
Balance sheet	55	Liquidity risk	48, 93
Business combinations	85	Loans and advances	80
Capital base and ratios	51	Loans portfolio analysis	27
Cash flow statement	57	Loans maturity analysis	29
Consumer Banking:		Market risk	44
· Financial review	12	Non-controlling interests	90
· Loan impairment coverage ratio	34	Normalised earnings	68
Contingent liabilities and commitments	92	Operational risk	49
Country cross-border risk	43	Other comprehensive income	54
Customer accounts	87	Other impairment	66
Derivatives	78	Other operating income	65
Depreciation and amortisation	65	Principal uncertainties	22
Dividends	67	Remuneration	100
Earnings per share	68	Reputational risk	49
Entity-wide geography information	61	Retirement benefit obligations	88
Fair value of assets and liabilities	74	Risk management framework	23
Financial calendar	123	Risk weighted assets	52
Financial instruments classification	69	Segmental and entity-wide information:
Financial review of Group:		· By business	59
· Operating income and profit	10	· By geography	61
· Group consolidated balance sheet	19	· Net interest margin and yield	63
Hedging	79	· By deposits	64
Highlights	1	Share capital	89
Impairment losses on loans and advances:		Shares held by share scheme trust	90
· Total individual impairment	82	Statement of changes in equity	56
· Consumer Banking	34	Subordinated liabilities	89
· Wholesale Banking	37	Summary of results	3
Income statement	53	Taxation	66
India listing additional information:		Trading income	65
· Summary of significant differences between Indian GAAP and IFRS	114	Wholesale Banking:
· Condensed financial statements in Indian Rupees	109	· Financial review	15
Industry concentration in loans and advances	27	· Loan impairment coverage ratio	37

This information is provided by RNS

The company news service from the London Stock Exchange

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